Financial Daily from THE HINDU group of publications
Wednesday, Feb 06, 2002
Industry & Economy - Sugar
Agri-Biz & Commodities - Sugar
Control on sugar to go next fiscal
NEW DELHI, Feb. 5
THE Government has decided to totally decontrol the sugar industry during the coming fiscal, subject to futures trading becoming fully operational.
Currently, the curbs on the industry are two-fold. The first relates to the obligation on mills to deliver a stipulated proportion (currently 15 per cent) of their produce as `levy' to the Government for the public distribution system. The second concerns disposal of the remaining 85 per cent `free-sale' sugar.
Although mills can offload this sugar in the open market, the exact quantum and timing of these sales are regulated by the Government through its announcement of monthly (now quarterly) `release' quotas for each factory.
Total decontrol would mean that the mills would not be obliged to surrender any part of their produce as levy at pre-determined prices. Also, they will be able to freely offload their sugar into the open market, with the Government not fixing free sale release quotas for each mill.
While announcing the intention to fully decontrol the industry during 2002-03, the Government has, however, decided that this would take place only in the event of futures trading taking off. Already, three exchanges - e-commodities Ltd, Mumbai, NCS Infotech Ltd, Hyderabad and e-sugarindia, Mumbai - have been given permission to conduct forward/futures trading in sugar.
"We expect the actual futures trading process to start around August-September. Once that happens, the industry can be fully decontrolled'', officials said. In fact, the mills themselves are now said to be somewhat wary of total decontrol, given the declining trend in open market sugar prices. A zero levy regime would release an extra 15 per cent sugar into the open market, depressing prices further.
The situation would be aggravated if there were simultaneous lifting of release curbs. Considering that the industry is currently saddled with stocks for meeting almost eight months' domestic consumption, the mills would compete with each other to offload their excess sugar. "Futures trading would prevent this outcome, as the mills can enter into forward positions and will not have to resort to distress sales in anticipation of falling prices'', the official added.
Storage, licensing curbs on agri-commodities to go: Meanwhile, in a separate decision, the Union Cabinet on Tuesdy decided to issue a Central Order under Section 3 of the Essential Commodities Act, 1955 to remove the requirement of licensing of dealers and restrictions on storage and movement in respect of foodgrains (wheat, paddy/rice, coarse grains), sugar, oilseeds and edible oils.
"In the context of liberalisation and the changed situation (with regard to the supply position of agri-commodities), it has been felt that restrictions such as licensing of dealers, limits on stocks and control on movement are no longer required as these only hamper the growth of the agriculture sector and promotion of food processing industries'', an official release stated.
Under the Essential Commodities Act, the Centre has delegated powers to State Governments to issue Control Orders to regulate various aspects of trading such as licensing of dealers, storage, movement, levy guest control, display of stocks and prices, etc.
The Cabinet also decided to take out the following commodities from the purview of the Essential Commodities Act: cement, textile machinery, textiles made from silk, textiles made wholly or in part from man-made cellulosic and non-cellulosic spun fibres, textiles made wholly or in part from man-made cellulosic and non-cellulosic filament yarn, man-made cellulosic and non-cellulosic staple fibres, yarn made from wool, silk man-made cellulosic and non-cellulosic spun fibre, man-made cellulosic and non-cellulosic filament yarn, nylon tyre yarn/chord/fabric, cable and wires and general lighting appliances.
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