Deregulate sugar sector: Rangarajan

A panel set up by Prime Minister Manmohan Singh has suggested the deregulation of the Rs 80,000 crore sugar sector and recommended that mills be freed from the obligation of supplying subsidised sugar to the government for sale under the public distributio(PDS)n system .

The committee, headed by Prime Minister's Economic Advisory Council chairman C Rangarajan, also pitched for freedom for mills to sell sugar, recommending the deregulation of the sector that has been stymied by tight government controls for decades now. The report has been submitted with the Prime Minister on Friday.

At present, mills are mandated to sell 10% of their output to the government for the PDS at cheaper rates that cover just around 70% of their cost of production. The government also fixes the quarterly quota of sugar that mills are required to sell in the open market, aimed at discouraging hoarding and keeping supplies steady.

If implemented, the scrapping of levy burden alone would leave an additional Rs 3,000 crore a year with the cash-starved sector, but it will also raise the Centre's food subsidy burden correspondingly. "Levy amounts to a cross-subsidy between open market and PDS sugar and is not in the interest of the general consumer or the development of the sugar sector. Therefore, levy sugar may be dispensed with," the report said.

The panel has also mooted linking of sugarcane price to the rates of its byproducts and suggested 70% of the ex-mill prices of sugar and those of each of its three major by-products--bagasse, molasses and press mud--be fixed as the dues to be paid to farmers for cane supplies. Moreover, the benchmark price fixed by the Centre--called the fair and remunerative price (FRP)--be the minimum rate for cane purchases, it added.

"The actual payment for cane dues would happen in two steps. The first would be the payment of a floor price, based on the FRP as per extant mechanism. The rest of the payment of cane dues will be done subsequent to publication of half-yearly ex-mill prices, on the lines indicated," the report said. It has also suggested a liberal export and import policy on sugar.

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