NEW DELHI, May 13: Total decontrol of sugar is in the offing with the food ministry seeking abolition of dual-pricing which will remove the subsidy on the commodity. It has proposed that the subsidy of Rs 600 crore that will be saved should be passed on to lower the price of wheat and rice distributed through ration shops. The rationale for this is that the benefits from supplying subsidised sugar through the public distribution system (PDS) amounts to a mere Rs 10 per month per family.

The proposal will come up for the approval of the committee of secretaries (COS) early next week. If approved, the proposal would need to be ratified by the union cabinet. The last time the issue of decontrol came up before the cabinet in November, it was opposed by the Left on the grounds that this would increase prices and would hit the poor. In an attempt to defer a decision, the cabinet then referred the matter to the COS.

The food ministry's note to the COS attempts to counter the Left's view and points out that abolition of dual pricing will actually bring down the market price of sugar right now, mills have to supply 40 % of their output to the PDS at uneconomical prices and make up for this by hiking the open market prices. According to the food ministry, government agencies can then buy the commodity at lower price and use this for distribution through ration shops.

In order to ensure that prices do not shoot up, it recommends that a buffer stock of 2 to 5 lakh tonnes be maintained. It also suggests that the government continue to regulate supplies by fixing allocation for each sugar mill. This would ensure regular supplies throughout the year.

The ministry also suggests abolition of state advised price (SAP) to rationalise the price for both the farmers and mill owners. Instead, the plan is to set-up a statutory board for sugarcane pricing (SBSP) which would take into account the needs of the farmers as well as that of industry. At present, fixing of prices, especially the SAP, is arbitrary and is usually fixed with a view to woo farmers. Usually, northern states have been fixing sugarcane prices payable by mills higher than the statutory minimum price (SMP) which is fixed by the Centre. Though, the gap between the SAP and SMP is lower in the Southern states, the mill owners lose substantially on supply of levy sugar. This not only erodes the profitability of mills, thereby turning them into sick units, but also makes the free sale quota (FSQ) sugar expensive.

Decontrol of sugar has been a long-standing demand of the industry which has been arguing that this is a logical conclusion to the policy of delicensing and decanalisation of exports. In fact, industry has pointed out that without decontrol, it incurs huge losses, and no exports can take place.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.