Government decontrols sugar: 7 things you need to know

Nasrin Sultana, Riken Mehta
Moneycontrol.com

Cabinet Committee on Economic Affairs (CCEA) on Thursday finally decided to decontrol sugar with certain riders. The sugar industry was the only industry left under the government control. It is learnt that the decontrol is largely in line with recommendations made by the Rangarajan committee.  What does decontrol mean? 1. Decontrol means no government control. It will no longer force mills to sell sugar to the government at a discount and wont put a limit on the amount that they can sell in the open market. 2. No levy obligation on sugar mills for 2 years. Levy sugar is the amount of sugar set aside from the total production for Public Distribution System (PDS). In levy sugar system, millers were required to contribute 10 percent of their output to the Centre for running ration shops at cheaper rate. This costed the industry Rs 3,000 crore a year, an amount sugar industry will now be able to save.

3. Release order mechanism by which government directed sugar companies as to when, how much to release sugar now goes away. 4. The government will buy sugar from the open market at market rates and subsidise it to PDS. The government will pay the difference between ex-mill and PDS price. Cabinet fixed the price of levy sugar at Rs 13.50 a kg in 2002 and it was never changed since then.  5. The government will bear Rs 5300 crore PDS sugar subsidy. 6. No hike in excise duty on sugar. Currently it is Rs 95 per quintal 7. Ex-mill sugar price will be capped at Rs 32 per kg for PDS The government maintained that the decision will not lead to any rise in retail prices of sugar. However, it would double the government's subsidy burden to Rs 5,300 crore annually from about Rs 2,600 crore. Why it was important to decontrol?

• Controlling sugar industry, farmer is politically beneficial in vote bank politics especially for UP, Maharashtra government.
• Sugar companies say government shackles mean thin profits, new industry doesn't come up and in turn sugar is imported.
• Also decontrol means farmers will get timely and better remuneration from sugar companies.