Sunday, April 7, 2013


Decontrol of sugar from the clutches of GOI was on the card for the last one decade though a vacillating government was not able to take courage in its hands due to political reasons. The recent announcement that the GOI would free the politically powerful sugar industry from the levy policy, whereby mills are forced to sell their products as per the quota fixed from time to time decides by GOI, must be a music to the industry. Whether this new policy will be accepted by the states will have to be seen because they are bound to buy the sugar from the industry at market prices for supply through the PDS at subsidized prices, expecting to be reimbursed the difference by the Center. Whether this is a industry friendly policy or the one that is favorable to the citizen is a matter of conjecture though prima facie industry is going to be largest beneficiary under the new policy. The new policy which is just approved may still be stillborn and one has to wait and see whether it will be implemented in toto. Here is a take on this new significant development.

"According to a mechanism approved by CCEA, states will now purchase sugar from open market through a transparent bidding process and sell it cheap through ration shops. The difference between the two prices will be borne by the Centre, but with a cap of two years. "According to our estimate, the current market price of sugar is Rs 32 per kg, while the price under the public distribution system (PDS) is Rs 13.50 per kg. This difference between these two prices will be paid to states. For this, the Centre will bear an additional subsidy burden of around Rs 2,700 crore," Food Minister K V Thomas told reporters after the meeting. He also assured there would not be any increase in the retail sugar price, as ample sweetener was available in the market. However, if the difference between market price and ration price rises during two years (up to September 2014), the extra burden would have to be borne by states. The sugar season runs from October to September." 

It is rather intriguing as to why GOI is so much fixated on a commodity like sugar which is now considered as "white poison" by the health experts and which has made a country like the US a morbid one with obesity and diabetes widely prevalent. While under the proposed Food Security Bill a substantial segment of country's population is being guaranteed of their basic needs of food calories through heavily subsidized grains which is understandable to some extent, subsidizing sugar cannot be justified in any manner considering that it is not an essential food for survival.  If one extends this logic there is no justification under any "National Agricultural Policy" in wasting precious land, water and other resources on sugar cane which is depletes the soil of its natural nutrients fast. A more logical alternative option could be to divert most of the land presently being cultivated with sugar cane for producing pulses and oil seeds in a phased manner.  


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