Sugar Decontrol: Rangarajan report is 'incredible', says Triveni Engg

An expert panel, headed by PMEAC chairman C Rangarajan, has suggested giving freedom to millers to sell sugar in the open market among other recommendations.

In an interview to CNBC-TV18, Dhruv M Sawhaney, chairman and managing director, Triveni Engineering says it is an absolutely incredible report. "This report will cater to all three sections—farmers, industry and consumers. All the recommendations are very forthright in bringing this sector into the main stream," he adds.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra.

Q: What are your first thoughts on the report?

A: I think this is an absolutely incredible report. This report will cater to all three sections—farmers, industry and consumers. All the recommendations are very forthright in bringing this sector into the main stream.

The North Indian farmers’ productivity, as Rangarajan said, hasn’t really gone up. He has correctly recommended that the Rs 3000 crore subsidy should be passed on by the center to the states.

Q: This 70% of profit sharing, you won’t have any qualms doing it because that will go from your pocket.

A: Absolutely not. We are currently paying much more. In the last two years, I think we paid over 80%. I am 100% for it. I think the restriction on everyone paying in time, within 14 days is also extremely important. The industry must pay the farmer, especially the small and marginal farmer, on time.

The two stage payment will allow equal distribution of cane price. It’s a very important which Ranagrajan probably has in his report. Right now, the first few farmers get 100% and the last few farmers have to wait till long time. So, this two stage payment is very good. It’s already being done in Maharashtra.

Q: What are your thoughts with regards to the levy quota removal? Can you just take us through the broad points in terms of the positive outcomes from that, if in case it does come through as a recommendation?

A: India is probably the only country in the world that has this restriction. Without this, now we will have much more stable regime of sugar prices. Both the investors and the farmers will be able to do much better. This also will help productivity. Most of the levy sugar is leaking. It doesn’t reach the people that it wants to go to. So, it’s something that is really not in keeping with the objective of the government.

Secondly, they have release mechanism, which is coupled with this levy sugar, which Rangarajan has also talked about, is fine to be done away with. There is no other agriculture commodity that has it.

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Q: Will the states accept it? The right to establish an SAP is something which they have used to keep their vote bank in place, do you think the states will buy this? They are getting this Rs 3,000 crore transfer, but will they buy the obligation not to announce an SAP?

A: Let’s take the report in different parts. UP is very much for decontrol of the levy sugar and the release mechanism. The separate part is to do with the cane part. I think it’s a move in the right direction. They have also been clear that in the long-term they may want for de-reservation of cane areas, they are not going for it now. I would really urge our state governments to move for this farmer sharing of profitability. It will bring in cane development in a much closer relationship. So, one part of the report is unanimous, which the whole country should adopt, the levy decontrol.

Q: What are the savings? Will the savings come from not having this unrealistic arrears or capital locked in because of this regulated releases, where will the saving come?

A: Maharashtra already has a two tier cane payment system. The whole Maharashtra sugar industry pays the farmers in two lots. So, this system has been tried and tested for many years in parts of India. I don’t think its something that can’t be used all over. I think these savings will come in two or three directions.

The first is that this whole thing will help the productivity of cane. So, you are going to have much more efficient raw material coming in and a smoother price mechanism. So, I really feel that investment will come in to not just the sugar sector, but the sugarcane sector as well. This will help in really modernising this industry, bringing it into the limelight of globalisation.

We also move away, I believe, with these policies from this sugar cycle, boom one day and bust the next day, huge cane arrears. So, I think investors will also be able to see a much more stable and they will be able to look at companies much more critically. I think this is going to be in the long-term interest of the consumer.