Financial Daily from THE HINDU group of publications
Thursday, Feb 07, 2002
Industry & Economy - Sugar
`Sugar decontrol only after cane price rationalisation'
NEW DELHI, Feb. 6
THE complete decontrol of the sugar industry will be preceded by the Centre taking steps to rationalise sugarcane prices and initiation of futures/forward trading, according to Mr Shanta Kumar, Minister of Consumer Affairs, Food and Public Distribution.
"We do not want a repeat of the 1978 experience, when decontrol without adequate preparation led to severe price volatility and forced the Government to restore controls,'' the Minister told newspersons onWednesday.
As a prerequisite, the Centre would like to first `rationalise' the existing pricing mechanism for sugarcane, under which State Governments `advise' cane prices that were much higher than the Centre's statutory minimum price (SMP). For the 2001-02 sugar season (October-September), the SMP was fixed at Rs 62.05 per quintal, linked to a basic recovery of 8.5 per cent with a premium of Rs 0.73 per quintal being payable for every 0.1 per cent increase in recovery beyond the basic level.
For Uttar Pradesh, where average recovery was around 10 per cent, this would have translated into a cane price of around Rs 73 per quintal.
However, the actual price `advised' by the State Government ranged between Rs 95 and Rs100 per quintal.
Officials said that although there was no legal obligation to pay the SAP - since it was only an `advised' price and not an officially notified price - the mills ended up procuring cane at the higher rate.
This was because the co-operative factories located in the vicinity of the private mills' cane area invariably paid the SAP, forcing the latter to also cough up the higher price.
"Sugar decontrol can take place only if there is a simultaneous rationalisation of cane prices, which would be reasonable for the farmer while also guaranteeing the industry's viability," Mr Shanta Kumar said.
"Ideally, we would like cane prices to be determined through mutual negotiations between mills and the growers without bringing in unnecessary dispute.''
The officials told Business Line that the matter of cane price rationalisation had already been referred to the Commission for Agricultural Costs and Prices (CACP), which would be convening a seminar next month to work out a viable pricing policy.
One option under consideration is implementing the Mahajan Committee's suggestion to follow the international practice of working out cane prices backwards by taking into account average open market price levels for sugar.
The committee had also recommended the setting up of a National Sugarcane Pricing Board, comprising representatives from the industry, farmers and the Government, which would fix a uniform all-India price for cane.
"The CACP could consider the Mahajan panel formula or even come out with its own,'' the officials added.
Mr Shanta Kumar said that to promote sugar exports, the Centre planned to fully reimburse the cost of transport borne by mills from the factory point to port.
"The reimbursement will be made on the actual cost incurred by the mill on internal transport and there will be no cap on this. We will be amending the Sugar Development Fund Act to enable us to use the Rs 1,200-crore fund to finance these expenses. The Bill would be tabled in the coming Budget session.''
During the 2000-01 season, the country exported 12.5 lakh tonnes of sugar, while in the ongoing season, another 3.5 lakh tonnes were shipped out during October-January.
Regarding wheat, a quantity of 43.94 lakh tonnes were lifted by exporters from Food Corporation of India's godowns from December 2000 to January 25, 2002, with actual shipments totalling 41.35 lakh tonnes.
In the case of rice - where exports began only in the current fiscal - a total of 13.29 lakh tonnes had been lifted by exporters till January 23.
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