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Deregulating The Sugar Sector: Good Tidings For The Industry?

| 2/21/2013 9:02 PM Thursday

The government's recently proposed move to ease the norms for the sugar sector could sweeten the atmosphere for the players as well as investors, says Amit Bhanot

In all probability sugar decontrol will soon be a reality. If we go by the quotes of the Food as well as the Agriculture ministers, it appears that the matter has been decided in the power corridors and a Cabinet note in this concern has been moved. Though this is a long-awaited demand of sugar mill owners, it remains to be seen whether it will bring about a reversal their fortunes. At the same time, consumers are already having nightmares about the steep rise in the prices of sugar.

Even if steps are taken in the direction of decontrolling the Rs 80000 crore sugar industry, as suggested by the Dr Rangarajan Committee, we cannot say with full certainty that the worst is over for the industry. In a democratic country like India, where farmers make up the largest section of the votebank, it is unlikely that the government would do away with all its control on such a key agri-sector, that too when we are expecting Union Elections within a year. However, this is certainly a very positive cue for the industry reeling under pressures.

The entire debate started on February 16, 2013, when on the sidelines of an ASSOCHAM program, Minister of State (I/C) for Consumer Affairs, Food and Public Distribution, Prof. K V Thomas announced that within 15 days, the government will decide on the decontrol of sugar industry, especially the levy of sugar and release mechanisms. "I think within the next 15 days, we would be able to take a decision on all the issues like levy of sugar, release mechanisms and others which the committee has studied," Thomas said.

Soon after this announcement, sugar stocks saw a spurt on the bourses as if some distant dream had come to life. But soon, another comment came in from Minister of Agriculture Sharad Pawar. This was regarding the doubling of excise duty on sugar mills to compensate the loss the government would incur following the deregulation of levy sugar, which amounts to around Rs  3000 crore. The proposal regarding the hike in excise duty has been included in the Cabinet note, and in all probability, the government will ensure that sugar available in the PDS mechanism will not become dearer at any cost in an election year.

What it clearly means for a common consumer, is that a price rise is inevitable.

 

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