The government's decision is unlikely to change the topography of the state sugar industry in the near future and leaders from Western Maharashtra have condemned the move cutting across party lines. Though the move has clearly upset the state Congress camp, it did not please the Shiv Sena either.

Major sugar barons and the state's Congress leaders, including Sharad Pawar, would have us believe that the decision would spell doom for the state's co-operative sugar movement, but the economist say it was inevitable. ``It was Congress which started dismantling the castle of industrial licenses under its economic liberalisation programme and now they are preparing to launch an agitation when BJP led coalition government at the centre removed one more brick,'' says a private financialconsultant Sadashiv Gokhle.

Sources in Saakhar Bhavan dismissed the fear that the delicensing would pose an imminent threat to the co-operative sugar movement. First of all, a new venture under fresh policy would find it extremely difficult to compete with co-operatives and those factories operating under licensing. Under the policy new sugar units would not be entitled to incentives like freedom from levy and other fiscal concessions. The existing units enjoying these incentives would, however, continue to do so.

Moreover, no new factory would be allowed to come up in a radius of 15 km from the existing unit to ensure adequate availability of sugarcane.

The existing minimum distance norms was 25 km, relaxable to 15 kms in areas where sugarcane availability was not a problem. In nutshell, the government has freed the industry from the license regime without withdrawing the protection shield around the existing unit.

The new policy, however, may severely affect the sick sugar co-operatives. Accordingto the figures available with the Maharashtra State Federation of Co-operative Sugar Factories, out 125 units about 40 were already sick. However, the sickness was mainly due to mismanagement rather than the market forces or competition. The existence of such units were questionable any way, an official in the state co-operative department said.

In any case, sources say, the government had issued more licenses before announcing the policy than needed as per the consumption demand. As against the consumption requirement of 145 lakh tonnes per annum the domestic industry has a licensed capacity of about 284 lakh tonnes. This excess license capacity may discourage the private sector, which had been waiting for gradual decontrol of sugar prices, to park their capital into sugar industry.

On the contrary, the major beneficiaries of the new policy would be those who were holding the licenses for sugar factory but were not putting up the plant. A license for a sugar factory was a sought after commodity once upona time. But for the last two years the licenses were nothing more than a piece of paper since the government was quite liberal in doling them out. ``In the case of Maharashtra, the sugar co-operative barons hold excessive licenses which suddenly became worth its weight in gold because the license gives distinct advantage over those sugar units which would begin to operate in a license free regime,'' said an official in Saakhar Bhavan requesting anonymity.

Even if the new policy does not imminently threaten the financially strong and well managed co-operative sugar factories in Maharashtra, it is being interpreted as political defeat for the state Congress leadership which had been a self appointed guardian of the state's co-operative movement. The Sugar Workers Co-ordination Committee, has already threatened to launch an agitation against the new policy.

Although not part of the food security system of the country, the sugar industry has for long enjoyed special protection at the hands ofgovernments at the Centre and in the States. In Maharashtra, the co-operative sugar movement was instrumental in building the mass base for Congress which eventually turned into a party of ``Saakhar Samrat.'' The industry is neither a core industry nor a major foreign exchange earner and yet even during the first flush of liberalisation in 1992-93 and 1993-94, the policy-makers dared not propose any fundamental change in the conspicuously politics-driven industry. The sugar economy represents a strange confluence of interests -- cane cultivators, the industry and its offshoots such as distilleries and alcohol-based units.

Those in favour of complete delicensing and decontrolling of sugar industry argue that the industry was a part market for commercial commodity and not the part of country's food grain economy. Hence there should be no harm in putting the industry under the discipline of market. However, the opponents argue that the relevance of co-operatives could not be judged by the economicparameters alone since it has a larger social goals.