Govt gears up to decontrol sugar | delhi | Hindustan Times
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Govt gears up to decontrol sugar

delhi Updated: Jul 14, 2010 01:07 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Moving swiftly to dismantle one of the last remnants of the “licence-raj” era, the government will prepare a proposal to ease tight controls on sugar in the next 10 days, agriculture minister Sharad Pawar said on Tuesday.

The proposal will come up for Cabinet discussion soon, he added. The move hinges on high prospects of surplus output next year.

The sugar sector continues to be subjected to strict controls, in force since the pre-liberalisation era.

The government decides the price of cane, buys 20 per cent of the produce at cheaper-than-market rates for distribution to the poor and fixes the amount each mill can sell in the open market every month. The government also decides how much bulk buyers of sugar, such as biscuit-makers, can stock it in their warehouses.

Many believe these archaic controls distort prices, cause seasonal shortages and stoke inflation. If controls are removed, then sugar prices will be dictated by market forces, not the government.

India, the world’s second-biggest sugar producer and biggest consumer, will head back to being a sugar surplus country after two years of deficits, which caused sugar prices to shoot last year.

Moves to decontrol the sugar sector had been mooted at least once earlier in recent years but the government shied away from changing the rules, fearing adverse effect on availability and prices.

Sugar is globally a controlled commodity, but India regulates it the most. Experts blame this control-freak policy for worsening the impact of shortages.

Under new rules, millers may no longer be required to sell 20 per cent of their produce —called levy sugar — to the government. The government-imposed cap on how much sugar can be sold each month might also go. However, the government will continue to fix profitable base prices for cane farmers, Pawar said.