Central Government Decontrols Sugar Industry

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The Central Government on April 4, 2013 decontrolled the Rs. 80,000-crore sugar industry. Through this decision, the government allowed market forces to come into play by abolishing the monthly release mechanism and doing away with sugar mills obligation to supply levy sugar for subsidised distribution under the public distribution system (PDS). The government said that the need to protect both farmers’ and consumers’ interests was taken care of by way of the decision.

The decision to unshackle the industry was based on the suggestions of a panel headed by Dr. C. Rangarajan, Chairman of the Prime Minister’s Economic Advisory Council (PMEAC). The decision was cleared by the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Dr. Manmohan Singh. The government insisted that the decision to decontrol the sugar industry will not impact sugar prices, saying that there was enough sugar in the country. It may be mentioned here that the production in 2012-13 was 26.5 million tonnes. In the current fiscal (2013-14), a production of more than 24.5 million tonnes is expected, as against a requirement of 22.2 million tonnes.

The Centre will continue to provide sugar to the poor under the PDS at the current issue price of Rs. 13.50 per kg. For this, the States will be free to purchase sugar through a transparent system at the current ex-factory price of Rs. 32 per kg which has been capped for two years. The difference between the purchase price and the issue price will be borne by the government.