What is it that this report contains exactly, that caused so much consternation to Gen Singh? The report's contents are tabulated in brief as follows:
Ground realities
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Why so?
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So, what’s
wrong with that?
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Solution to this problem, as proposed by
Rangarajan Panel
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A sugar mill has to compulsorily give 10% of its
production output to Central Govt at a price determined by Central Govt.
This sugar is called LEVY SUGAR.
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This enables Central Government to get access to
low cost sugar stocks for distribution through Ration Shops. At present
prices, the Government of India saves about Rs. 3,000 crore on account of
this policy
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The
burden is borne
by the sugar sector. Sugar mills increase their selling price to that extent in the
open market to offset any deficit caused. If the mills
are unable to transfer this deficit to buyers, they suffer losses.
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Scrap Levy Sugar!
Let the state governments purchase sugar for Ration Shops through open
markets. Any shortfall in money can be compensated by Central Govt. This
will remove the burden on the sugar mills, and consequently on the consumers.
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Many state govts also prescribe prices
called SAP which are higher than Central Govt prices for
Non Levy Sugar
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To strengthen the farmer interests
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Acceptability
of the price determined by State Govts is low. Farmers
and millers have squabbled for long on which is a price fair to both
farmers and millers.
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Scrap SAP. Farmers should be paid an amount
of higher of:
(a) 70% Revenue generated from sugar and each of its three
major by-products, namely bagasse, molasses and press mud, OR
(b) Central
Govt determined minimum price
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State governments have the power to reserve any area
where sugarcane is grown for a specific mill. Every
sugar mill is obligated to purchase from cane farmers within the “cane area reservation” and conversely, farmers are
bound to sell to that mill.
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Cane area reservation is intended to
(a) give a minimum assured supply of the
highly-perishable raw material to a mill;
(b) committing the mill to procure at a minimum
price (Central Govt price/SAP).
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1) This arrangement
may reduce the bargaining power of the farmer, who is forced to
sell to a mill even if there
is a lot of pending sugarcane in the sugar mill
2) Also reduces the farmer’s remuneration if the designated mill
has a lower recovery rate.
3) Mills also lose flexibility in augmenting cane supplies, especially when there
is a shortfall in sugarcane production in the cane reservation
area.
4) Mills are tied
down to the quality of cane that is supplied by the farmers in the
area.
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Phase out and
eventually scrap “cane area reservation”
policy.
Instead, states should encourage development of market based
long-term
contractual arrangements.
For those states that may want to continue in the interim, the current system may be allowed to continue. However, where a
state does decide to continue with cane area reservation, it must be
ensured that the period of reservation is not more than three to five
years.
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The Central Government, has prescribed a
minimum distance of 15 km between any two sugar mills.
Enhancement of this distance has also been allowed on the request of some
state governments.
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It is expected to ensure a
minimum
availability of cane for all mills
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1. Setting up of a new mill requires approvals, notwithstanding
delicensing. This can cause distortion in the market.
2.
The virtual monopoly over a large
area can give the mills power over farmers,
especially where landholdings are smaller.
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Scrap, as soon as cane area reservation
is scrapped
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The release of non-levy sugar into the market is regulated by the
Central Government through a controlled release mechanism.
Release orders are given quarterly.
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To match supply
with anticipated
demand based on the data available with the
Directorate of Sugar
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1)
This mechanism of regulated release
of non-levy sugar imposes costs directly on mills(and hence indirectly on
farmers) on account of inventory accumulation, inability to plan cash flows,
etc.
2)
Further, seasonal fluctuations in
price are continuing.
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Scrap controlled release mechanism.
Let the sugar be released based on mutual understanding of the mill and the
buyer of sugar.
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Central Govt controls how much sugar in quantitative terms to be
imported or exported, depending on mill-wise monthly production
and stocks,
local production levels and world market conditions.
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Stabilizing domestic consumer prices of Sugar
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Not effective in controlling consumer prices. Causes considerable
instability for the sugar cane and sugar production. Even though India contributes 17% to the global sugar
production, its share in the exports is only 4%.
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Don’t ban
imports/exports. Instead adjust import / export duties.
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I wonder if Gen Singh had bothered to read the report and understand the purposes it serves, before declaring a war cry against the report!
