Millennium Post

Sugar industry bodies urge Govt to act on Rangarajan report

After the much awaited report of the Prime Minister-appointed Rangarajan Committee on reforms in the sugar and sugarcane sector was submitted to the PM on October 12, the Indian Sugar Mills Association (ISMA) and National Federation of Cooperative Sugar Factories Ltd (NFCSF Ltd) jointly held a press conference in New Delhi to convey that they both support the recommendations made by the panel to decontrol the sugar industry and that they urge the government to take immediate actions to bring the long-awaited changes.

'It’s a very positive report and the industry welcomes it completely. If the government accepts the report, the sugar sector will grow at a faster pace and there will be lot of investment at all levels including the farm gate, ISMA Director General Abinash Verma said at a press conference.

Verma added that decontrolling the sector would be in the interest of all stakeholders, including farmers, millers and consumers, and would lead to a stable and predictable environment. The industry has been for a long time demanding that the government do away with the systems of regulated release mechanism and levy sugar obligations.

The Rangarajan committee has clearly recommended in its report the immediate deregulation of two important controls involving abolition of regulated mechanism and open market sugar purchased by the government for the public distribution system (PDS). According to the committee’s report, these two controls are archaic and have no relevance in today’s market.

The committee has also accepted that the levy sugar burden is being cross-subsidised by open market consumers, who consume 90 per cent of the sugar and that the losses suffered by the sugar mills are partly transferred to the farmers. Hence, there is a strong case that similar to the other commodities where the government makes procuresments from the open market, sugar too should be procured by the government from the open market.

The the financial burden of welfare programme can be borne by them and not by the sugar mills or the farmers or the open market consumers.

Currently, due to the levy mechanism, the sugar industry is bearing the burden of Rs 3,000 crore which could be passed on to the farmers and other stakeholders if the levy mechanism is done away with, said NFCSF Ltd President Jayantilal B Patel.

'The regulated release mechanism adversely impacts the smooth cash flow of sugar mills, who are unable to sell their sugar as per their cash flow requirements to pay to the farmers, especially during the crushing season. This leads to either cane price arrears of farmers or borrowing of working capital at 14-16 per cent, increasing their production cost and making them uncompetitive especially in the international market,'  said NFCSF Ltd Managing Director Vinay Kumar. 'Both the committee and the government ministries have at various times accepted that the regulated release mechanism is unable to meet its objective of controlling sugar process. If the government is able to control prices of other commodities without having to regulate release mechanism, why should they have a special and unfortunate treatment for sugar?' added  Kumar. He also said that as recommended by the Rangarajan Committee, ISMA and NFCSF together appeal to the government to remove the levy sugar burden from the sugar industry and abolish the regulated release mechanism with immediate effect.

Both ISMA and NFCSF agree that reforms on the sugarcane side need further discussions amongst the state governments, farmers and the sugar mills to incorporate views of all the stake holders in the new policy framework.  ISMA President Gautam Goel opined that the Rangarajan Committee recommendation would help achieve an annual growth rate of 15-20 per cent and take the Rs 80, 000 crore industry to Rs 1,60,000 crore in the next five years.

With a more predictable and stable policy environment, large-scale investments are expected to be attracted which would improve efficiencies both at the factory and farm levels, he pointed out.
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