According to sources in the industry, as suggested by the Rangarajan Committee, the decision will help the industry to achieve its potential growth of 20-25 per cent per annum.
Sources added that the twin decisions of the government to give freedom to the sugar industry to sell sugar on commercial consideration and remove the burden of levy sugar were, indeed, extremely important and crucial.
Abinash Verma, director-general, Indian Sugar Mills Association (ISMA), explained, “Removal of the burden of levy sugar will give the industry an annual savings of Rs 3,000 crore, whereas abolition of regulated release mechanism will reduce inventories and ensure better cash flows.”
He added, “These much awaited reforms will reduce the cost of production and improve liquidity with millers which, in turn, will ensure better and timely payment of cane price to farmers as also assure better quality sugar, at reasonable prices on a sustained basis, to the consumers.”
Verma pointed out, “Abolition of regulated release mechanism and removal of the burden of levy sugar will improve timely payment of remunerative price to the farmers which, in turn, will control the infamous sugarcane and sugar production cycle, known to badly hit all the stakeholders, including, farmers, millers as well as the consumers. These two important reforms will go a long way in improving efficiencies both at farm and mill levels and make Indian sugar competitive in the international market.”
Meanwhile, responding to a query regarding manipulation by sugar mills following the deregulation, Sanjeev Babar, MD, Maharashtra State Co-operative Sugar Factories Federation Ltd, commented, “No there will be no manipulation by the sugar mills after deregulation of sugar because we will plan a strategy to sell sugar in future. Earlier the cost of production was more than sugar selling rate. While Rs 3,400 per quintal was the cost of production, the sugar rates were Rs 2,800-2,900 per quintal. After the deregulation of sugar, the loss which the mills were bearing, would be brought down and thus the sugar mills would not be manipulating the market.”
He added, “Our sugar industry is very big and thus after the deregulation, the industry will benefit. We will prepare the strategy and do the balancing act. The sugar will be used as per the national consumption and the surplus sugar will be exported in the international market or it will be used for future consumption.”
Babar stated, “The food ministry has also recommended regulation of sugar exports and imports through tariff to be decided by an inter-ministerial group from time to time. The ministry has asked states to decide on cane area reservation and packaging in jute bags, while the decision on sale of by-products like molasses, bagasse and ethanol be taken by nodal ministries.”
Anil Shukla, secretary-general, Sugar Technologists Association of India, explained, “Sugar industry is an elite industry and it is catering to the needs of the people for so many years. The government has lifted the levy from most of the industry like wheat, rice, oil, and many other sectors but never lifted the levy from sugar. This has been creating hurdles for the sugar industry. Lifting the levy from sugar is very good news for the sugar industry.”
He further stated, “The price of sugar is Rs 38 per kg. The rate of sugar in the market is less than the cost of production. The mills sell 70 per cent of sugar to the food and beverage industry like Nestle, PepsiCo, Coca Cola and other big companies whereas 30 per cent goes to end-users. So the question of manipulation by the sugar mills doesn't arise.”
Shukla added, “Earlier due to release mechanism, we were forced to sell the sugar in last 3 days of the month at whatever prices they used to pay. We were selling the sugar at a price fixed by middlemen and thus middlemen were benefiting. Middlemen will be never eliminated from the process but now the element of middlemen will reduce to a large extent after the deregulation. Even the equipment makers will be benefited by the move of the government.”
He concluded, “The reforms approved by the government for this very important sugar sector in India will make the sugar industry more viable as well as attractive and bankable. Also it will attract large-scale investments both from within the country as well as from abroad. This will improve efficiencies, give better returns to the farmers as well as improve sugar availability and quality for the consumers. The industry, and I am sure the farmers as well as the consumers too, welcome this important and historical decision of the government to free the sugar sales from the age-old unnecessary and archaic controls.”
