Another sugar scam in the offing

Another sugar scam in the offing
Navika Kumar

New Delhi, Feb 1: Barely a year after the government first got flak over importing sugar from Pakistan, another sugar scam threatens to erupt, this time over favouring select Indian sugar mills. It's a Rs 360-crore deal which Union Food Minister Shanta Kumar had opposed last month and was then forced to change his stance.

The scam has its genesis in the structure of the sugar market and the government's control over it. Right now, the government forces sugar mills to sell 40 per cent of their produce to it at fixed rates for the PDS or ration shops, and to make up for losses in this area, allows mills to rig up prices of sugar sold in the open or free-sale market.

This is done by fixing the amount of sugar which is to be released in the market each month done jointly by the food ministry and the sugar mills association. Normally, 8 lakh tonnes of sugar are released each month by this method. This quota is then divided up between the mills, each of which is then given a ``release quota'' to sell sugar inthe free market.

In addition, another 20,000 tonnes can be released at the discretion of the food minister. Since any additional quota allows mills more funds, there is usually a tussle for this traditionally, therefore, the quota has been used as a form of patronage. Based on a market price of Rs 15,000 per tonne, the discretionary quota adds up to Rs 360 crore a year.

On December 30, food minister Shanta Kumar decided to do away with this and this was circulated by the ministry. ``There is a practice of releasing additional quantities of free sale sugar to individual sugar mills over and above their normal monthly release. Government has decided that with effect from 1st January, 2000, this quota will be discontinued.''

This then got the sugar mill owners very agitated and they approached the Prime Minister's Office to get this situation changed. In the event, Shanta Kumar decided to restore the discretionary quota, though with a caveat. This time these quotas will be awarded at the discretion of thePM's Office.