Sugar sector stable; states free to buy in open mkt: Thomas

Food minister KV Thomas, in an interview to CNBC-TV18, says that the partial removal of the sugar decontrol would benefit the mills, the states and ultimately, the consumer. "Sugar production has stabilised over the past four years and sugar will continue to be disbursed through the public distribution system," he adds.

Also Read: CCEA decontrols sugar; companies to save Rs 3,000cr Below is an edited transcript of the interview on CNBC-TV18 Q: What was the motive to partially decontrol sugar prices and levy obligations for two years? Will prices in the open market go up?
A: The sugar scenario in the country needs to be understood. It follows a five-year cycle. In the first three years production rises, the prices come down and the government has to export with a subsidy. As a result, in the following years, the farmers do not produce which sends prices up and the government has to import with a subsidy. For the last four years, the sector has stabilised at a comfortable production level of 240-260 lakh tonne.
Domestic consumption requires 220-230 lakh tonne. After this 220-230 lakh tonne is disbursed, 17-20 lakh tonne is issued to public distribution system (PDS) system which is called levy sugar. Now farmers and sugar-producing states do not wish to be paid the fair and remunerative price (FRP) price of Rs 19.5 per kg when the market price is Rs 32.
According to the government's announcement, the PDS system will continue and the states will continue to receive the quantity of sugar as before and at the price of Rs 13.50 per kg. However, the states are free to purchase though a transparent tender process, but at a cap. At present, the ex-mill price is Rs 32 per kg. So, the government’s subsidy burden is Rs 32 minus Rs 13.50 i.e Rs 18.50 per kg and this adds up to Rs 5,300 crore for the current burden of Rs 2,300 crore.
So, farmers will be paid cane arrears and consumers will get sugar at very reasonable prices. There is no question of increasing the price in the open market. Q: Why have you set only a two-year timeline for the abolition of levy sugar? is there a chance that it could be extended?
A: No, this is a decision for two years. After two years, we will take a decision. Q: What is the decision regarding the rules on distance between sugar mills and the quantity  of sugar that can states buy from the open market?
A: That is a decision that has to be taken at the state-level. The government of India can only control the levy on sugar and the release mechanism. Q: The decision to suspend the release order mechanism was part of the Rangarajan Committee’s recommendations. But there a view that that the removal of levy was an instrument to keep prices in check? Will there be more volatility?
A: For the last four seasons, the sugar sector has achieved a comfortable position. India will have enough sugar for domestic distribution and if needed, for export.