The government’s decision to scrap the levy on sugar and do away with the regulated release mechanism has a lot to commend itself. But for the ailing sugar industry, it is too little, too late. It seems the government has taken the belated decision with a great measure of reluctance. For instance, it has mentioned that the decision would be reviewed after two years. In practical terms, this means that the fear of levy would hang over the industry’s head like the sword of Damocles. If anything, it is a pointer to the lack of confidence on the part of the government. In any case, the decision addresses only one problem – that of marketing.
There are more serious problems facing the industry. The pricing of sugarcane is one of them. The Rangarajan panel had recommended a revenue-sharing system, which benefits both the cane growers and the sugar factory owners. No other formula works because of the peculiarities of the industry, whereby cane growers often have to wait for weeks, if not months, to get the price of their produce. The Centre’s decision to entrust the fixing of sugarcane prices to the states may be democratic but it can aggravate the industry’s problems. It cannot be gainsaid that the chances of states coming under pressure from sugar lobbies are greater than the Centre.
Liquidity problem is, in fact, endemic to the industry. Given this backdrop, its apprehension that the states would succumb to pressures and announce high sugarcane prices cannot be dismissed as unfounded. Both the farmers and the industry need safeguards. Because of the partial decontrol, sugar prices have slightly gone up in the market as expected. Economic reforms have taught one thing — control and regulation are anathema to growth and success. The sooner the sugar industry is liberated, the better it will be for its stakeholders.