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January 9, 2013Sugar Industry
The 80,000 crore Sugar Industry saw a bumper production this year, making the Industry taste sweeter, as compared to the several previous years. High production in the industry led to higher exports and signs of freedom from government direct control, were seen as the positives for the industry. The end consumers had to pay Rs. 10 per kg more for the commodity through the year, and the high retail prices helped the industry clear the back log it had created over the years. The high price generated from the retail distribution, helped to recover the costs and payments of over Rs. 52,000 crore.
Also Read on GWI List of Top Sugar Manufacturers, Exporters in India.
Decontrol Regulation for Sugar Industry
The year for the industry started on a good note with the appointment of an expert panel to review and examine the decontrol policy of the sector. This move was brought in by the Prime Minister Manmohan Singh and gave a ray of hope to the people. The expectation of government freeing the only industry left under its control was seen in the minds of the industry players and thus trying to make 2013, to be a memorable landmark year for the sector.
Currently the entire industry on which five Crore cane farmers are dependent is fully under the control of the government. Right from fixing the cane price to the marketing of the sweetener, every activity is carried out under government’s control. A positive energy flowed in the industry which was liked by all, when an expert panel headed by C Rangarajan submitted a report on the decontrol of the sector. The committee asked for immediate action regarding two of the major controls which included regulated release system and levy sugar obligation.
Currently under the system of regulated release and levy sugar obligation, the central government fixes the quota of sugar that be sold in the open market. This comes under the former control regulation where as under the latter the government asks mills to contribute 10 percent of output to run the ration shops costing industry Rs 3,000 Crore a year. Previously, it was seen that with the debate going on, related to the decontrol of the sector, government started loosening its control on the sector. This was seen when the regulated release mechanism was made a bit liberal since April. The move helped mills to manage inventories and cash-flows better.
Attempts made by the Government to Decontrol Sugar Industry
Several attempts have been made by the government to decontrol the industry. The first attempt came in the year 1971-72 and again in 1978-79, but the efforts ended with no concrete result in hand. Also in 2010, under the reign of Sharad Pawar as Agriculture Minister, decontrol policy was raised for implementation but ended empty handed.
The year 2012 remained a favorable year for the sugar industry, as the decontrol discussion was under process and the industry also witnessed surplus sugar production. Sugar output rose to 26.34 million tonne in the 2011-12 marketing year, as against 24.4 million tonne in the previous year. As far as the exports are concerned, Exports from India, the world’s second largest producer but biggest consumer, stood at 3.4 million tonne, as against 2.6 million tonne in this period. High production initially promoted government to allow exports of 2 million tonnes which was then freed by the month of May. Another major boost came when the government allowed the pricing of the ethanol (a by-product of sugarcane) to be decided by the market forces. The year turned out to be fruitful for sugarcane farmers as well, as they got better price from the industry and cane payment arrears were also not very high.
Read more on Indian Sugar Industry – Is Sugar turning bitter.
Higher cane price resulted in the increase of retail sugar price by Rs.10 in one year to reach Rs 44-45 per kg. This increase only added to the burden of the end consumers who already faced turmoil, due to the burning inflation. However the scenario currently is under control and is not worse as had happened in 2009-10.
So it can be said, “It was a good year for the sugar sector, and we should look forward to the acceptance of decontrol by the government in 2013”.
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