The Cabinet Committee on Economic Affairs, headed by Prime Minister Manmohan Singh, gave its approval to decontrol Sugar sector based on Rangarajan committee.
Rangarajan committee had recommended to decontrol sugar industry. Size of the industry is around $15.5 billion (Rs. 80,000 crore).
“There will be no levy on sugar for two years .There will be no change in the PDS price of sugar. There will be no burden on the consumer,” food and consumer affairs minister KV Thomas told reporters after the Cabinet Committee on Economic Affairs (CCEA).
Thomas further said that government tried to protect the interests of farmers and consumers.
“There was a huge burden on the government to see that farmers and consumers’ interests are protected and we have managed to balance that,” he said
India is the world’s second largest producer of sugar (Brazil is at first position) at nearly 340 million tonnes and the annual output is worth around Rs. 80,000 crore (around $15.5 billion).
Abolition of the levy sugar mechanism and dismantling of quota system
According to new policy sugar mills will no longer be forced to sll 10 % of their output for PDS at discount price. Currently sugar mills have to provide 10% of their output at subsidized rate for Public Distribution system where government provides sugar and other commodities to poors at nominal rates.
This step will be a shot in the arm for Sugar mills because now they can sell sugar at market price.
Sugar industry can save Rs 3000 per year due to the levy sugar abolition.
Even though India started liberalization in 1991 but Sugar sector is still the most controlled sector in India. There are political reasons or compulsions behind this. Sugar sector provides direct employment to 500,000 people directly in 500 sugar mills and 50 million farmers depends on Sugar Sector for their livelihood.
Sugar politics plays a vital role in big states like Uttarpradesh and Maharashtra. Political leaders always used Sugarcane prices to woo farmers in their favors. Sugar cane prices remains an important part in the manifesto of all political parties.
No change in the PDS price of sugar
PDS Consumers will get sugar at subsidized rate through PDS system but the cost will be incurred by states. State governments will buy sugar at market price from Sugar mills and will sell at subsidized rates to poor people through PDS system.
Later on Central government will reimburse the cost to State government. Central government have to spend 53 billion rupees ($972 million) a year as subsidy.
Sugar industry is on cloud nine
Sugar industry has expressed happiness on the decision. Now sugar mills can sell 2.4 million tonnes of stock at market price. Currently Sugar mills were selling sugar’s (10% of their output ) to government below market price.This will reduce the loss of Sugar mills.
This decision will reduce our inventories and ensure better cash flows,” said Abinash Verma, director-general of the Indian Sugar Mills Association.
“Removal of the burden of levy sugar will give the industry an annual savings of Rs 3,000 crore.” Abinash said.
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