India plans to seek reforms for its tightly-controlled sugar sector within three months, the agriculture minister said on Tuesday, which could include more open market sales and letting firms build larger stocks.
Sharad Pawar announced a reform process in motion a week after he invited industry leaders for talks and as reports came in that the sugar crop by the world's top consumer and No. 2 producer would beat estimates after a poor harvest last year that sent domestic prices soaring.
"We will prepare a proposal for sugar sector decontrol in 10 days ... It will be placed before cabinet in two to three months," he said when asked when the government would go ahead with the reform.
Room for reforms, long sought by industry, has been made possible as adequate monsoon rains in cane-growing areas and higher planting is expected to boost output this season, giving India a sugar surplus for the first time in three years.
"Production will definitely exceed demand," Pawar told reporters on Tuesday.
His remarks cheered millers, who said a clear time frame for easing controls signalled a firm commitment by the government, which has also recently ended price controls on gasoline and reformed fertiliser pricing. See
"Now there are concrete signs the government will go ahead with lifting the restrictions on the sector," said Vinay Kumar, managing director of the National Cooperative Federation of Sugar Factories Ltd.
India now controls the price of cane and directs mills to sell up to 20 per cent of their output at a big discount for welfare schemes, decides how much sugar should be sold in the market, and imposes limits on stocks that big buyers can hold.
A relaxation of a rule requiring millers, many of which are actively traded on the nation's bourses, to sell part of their output at subsidised rates to the government would be well received, an analyst said.
"Sugar mills will benefit as their obligation towards the subsidised sale would get reduced," said Veeresh Hiremath, a senior analyst with the Hyderabad based brokerage Karvy Comtrade.
Industry officials say strong controls on sales and stocks distort the market and accentuate swings in output in the country, which was a large sugar importer last year, helping New York raw sugar futures surge to the highest in 29 years.
While cane planting in India is higher than last year, the government would get a proper assessment of the crop in two months after watching the progress of the June-September monsoon rains, which have been adequate in cane areas so far.
"The government will prefer to usher reform measures before the start of the next season in October when they will get a clear idea about production, which looks good," Kumar said.