Rangarajan-led panel proposes decontrol of sugar sector

A panel headed by C Rangarajan, chairman of the prime minister's economic advisory council, has recommended scrapping the mandatory norm of buying 10 percent of sugar mills' output for supplies to the poor.

"The levy quota is leading to unnecessary losses to the millers. Our advice to the government is that buy sugar from open market for PDS," Rangarajan said.

 Rangarajan-led panel proposes decontrol of sugar sector

The committee, headed by Chairman of the Prime Minister's Economic Advisory Council (PMEAC) C. Rangarajan, also suggests doing away with levy sugar obligation for mills. Reuters

Levy quota is the quantity of sugar that millers have to mandatorily sell to the government for distribution through PDS. However, the mills are allowed to sell non-levy sugar in the open market, but the quantity each mill can sell is fixed by the government.

The panel has recommended fair and remunerative price (FRP) decided by the central government be given to sugarcane farmers at the time of purchase and also doing away with the system of state-advised price (SAP) fixed by state governments.

In the present system, the states decide an SAP which usually is higher than the FRP.

The panel has suggested a revenue sharing model for the farmers, wherein sugar manufacturers should distribute 70 percent of the realisation on sugar and by-products to farmers. "Subsequently, on a half-yearly basis, the state government concerned would announce the ex-mill prices of sugar and its by-products, and farmers would be entitled to a 70% share in the value of the sugar and by-products produced from the quantity of cane supplied by each farmer. Based on the share so computed, additional payment, net of FRP already paid, would then be made to the farmer," the government release said.

Sugar stocks like Bajaj Hindusthan, Balrampur Chini, Dhampur Sugar and Shree Renuka gained between 2 percent and 4 percent following the proposals.

Key recommendations:

Scrap minimum distance rule for sugar mills in long-term

Govt should move to long-term agreement with cane farmers

Cane farmers should get 70% of all revenue

Panel recommends revenue-sharing payment for sugar cane

Sugar mills should get 30% of all profits from cane products

Farmers should be paid frp as minimum cane price

Panel recommends changes to cane payment arrangements

The committee has also recommended dispensing with the mandatory requirement of jute packaging

On external trade, the committee has favoured a stable policy regime with modest tariff levels of 5% to 10% ordinarily, and dispensing with outright bans and quantitative restrictions

Updated Date: Dec 20, 2014 13:37:40 IST