As a PM-appointed high-level panel begins reviewing India's sensitive sugar sector, still tightly controlled by the government, the food ministry has made its views clear: any “deregulation”, it said, must ensure fair-play in domestic markets so that retail prices don’t shoot up.
The food ministry’s inputs to the top panel, headed by Chakravarthy Rangarajan, who heads the PM’s Economic Advisory Council, assume significance because it administers the sugarcane industry. The panel itself was set up on the request of food minister KV Thomas.
Thomas is understood to have stated that deregulation was imperative, but freeing up of exports should be done in way domestic stocks aren't affected and sugar prices don't soar. He has also stated that millers must be prepared to allow farmers to sell their cane to any mill of their choice, currently prohibited.
This is the third such attempt in recent times to “decontrol” sugar market, a process that could free the commodity from government controls and dismantle one of the last remnants of the “licence-raj” era.
The government decides the price of cane, buys 10% of the produce at cheaper-than-market rates for the poor and fixes the amount each mill can sell locally and abroad. The government also decides how much sugar bulk buyers, such as biscuit-makers, can stock.
India is the world’s second largest sugar producer and its biggest user. The country faces shortages after every three years of glut, mainly because farmers tend to shift away from cane cultivation because of pending payments.
India’s household consumption of sugar is a bare 25% of what it produces. The remaining 75% goes into commercial products. Yet, the sweetener passes through a maze of controls at every step from farm to factories, before being sold. Economists often consider this control-freak government policy archaic.