Consulting major KPMG on Monday suggested the establishment of an independent regulator for the sugar industry which is facing a glut in the current marketing season, and asked for a strategic stock of sugar to help maintain a sustainable price band.
In a report titled,"The Indian Sugar Industry – Sector Roadmap 2017," questioned the logic of having sugar as an essential commodity.
The study suggested that the minimum distance separation between mills should account for regional variations, with a national minimum benchmark of 25 km.
A key recommendation of the study is to create a strategic stock for sugar that would enable the government to intervene as a market participant, rather than through the monthly release mechanism under which it forces sugar mills to sell a quota to the government.
The operation of the strategic stock, KPMG recommends, could be done by an independent expert agency and will be aimed at maintaining the sugar price in a sustainable band.
“Today, regulations influence almost the entire value chain including land demarcation, sugarcane price, sugarcane procurement, sugar production and sale of sugar by mills in domestic and international markets," it said.
A study conducted by AC Nielsen has clearly brought out that more than 61.5 per cent of free sale sugar is consumed by industrial and small business segments, while high income households (with a monthly income of more than Rs 5,000) account for approximately 12.8 per cent of total consumption.
"This leaves a mere 25.7 per cent in the lower income group, which approximately consumes a paltry 2-3 kg per month per household," Arvind Mahajan, Executive Director, KPMG Advisory Services, said.