Free sugar industry from all controls: Rangarajan panel | SupportBiz


Free sugar industry from all controls: Rangarajan panel

An expert panel set up by Prime Minister Manmohan Singh Friday recommended lifting all controls on the sugar industry, among the most regulated sectors in India, to balance the interests of farmers and mills.

Among the steps, the panel suggested 70:30 revenue share of sugar sale between farmers and millers and scrapping the present levy system that requires mills to sell 10 percent of the output to the government at cheap rates for supplies through state-run fair price shops.

The committee, headed by C. Rangarajan, chairman of Prime Minister's Economic Advisory Council, also called for the scrapping of the mandatory rule that requires sugar to be packaged in jute bags.

"The levy quota system is leading to unnecessary losses to the sugar mills. It is also affecting the farmers," Rangarajan told a press conference in New Delhi after submitting the report to the prime minister.

"Our recommendation to the government is that sugar for the public distribution system should be bought from the open market," he said, bringing cheer to the sugar industry that has for nearly two decades now been demanding total decontrol.

India is the second largest producer of sugar at nearly 340 million tonnes and the annual output is worth around Rs.80,000 crore (around $15.5 billion). The industry imacts the livelihood of 50 million farmers and employs 500,000 people directly at the mills.

The expert panel feels the industry has the potential to double the revenues to over $30 billion in the next 10 years if the untapped potential is unlocked with total decontrol.

Rangarajan said the panel wants 70 percent of the revenues generated by mills - from the sale of sugar, bagasse and byproducts like molasses proceeds - to go to sugarcane farmers.

"That alone should be the yardstick for the price they should get," he said.

In the process, he said, the panel wants both the statutory minimum price, or the minimum price for sugarcane fixed by the central government, as well as the state advised price fixed by some state governments, to be abolished.

"The Indian Sugar Mills Association strongly welcomes the positive recommendations of the Rangarajan Committee on sugar sector reforms," said the association's director general Abinash Verma.

"The road map devised by the Rangarajan Committee will make the sugar industry vibrant and competitive. It will help farmers get better and timely cane payment," the director general said.

"With the decontrol of the sector, the industry could grow at an average of 15 to 20 percent per year in the next five years or so. We would eagerly await quick approvals from the government," Verma added.

The expert panel also said that the aberrations in the sugar industry caused by such factors like levy sugar and controls were causing cyclical swings that were not just affecting production but also the money payable to cane farmers.

On external trade, the committee has favoured a stable policy regime with modest tariff levels of 5 to 10 percent ordinarily, and dispensing with outright bans and quantitative restrictions.