NEW DELHI: After the Union cabinet deferred the decision to decontrol the sugar business, food and agriculture minister and sugar belt king, Sharad Pawar on Saturday, came out batting for the proposal yet again.
Even as the government ran shy of pushing a move that many analysts believe could lead to increase of sugar prices after a short period of relief, the NCP supremo said, "The time is ripe to abolish the levy system."
Speaking on the sidelines of a seminar, he defended the move that his ministry has been leveraging up for a while but not finding many takers in at the time of soaring inflation. "This is the proper year because we have got good stocks of about 110 lakh tonnes as carry over and we expect good production. So this is the proper time when there is ample stock of sugar , one should take that decision," Pawar said.
But many observers have pointed out that sugar prices have risen in the past year despite a glut and the crop for the next season is expected to fall much below the previous year's production and lead to a tighter supply.
The industry is expecting a decline of 50-65 lakh tonnes, down to 200 lakh tonnes in the 2008-09 season, compared to an estimated 265 lakh tonnes from the current crop.
An AICC member, K Gidwani, has claimed so much in his missives to both the PM and Pawar. "The benefit of market fluctuation is being taken away particularly by middlemen, traders/hoarders and forward market traders," he has written in his letters while demanding that the industry cannot be decontrolled. He has warned that even the announcement of decontrol could lead to upward spiraling of prices.
At present, the government makes a compulsory levy of 10% of production on the mills for PDS supply besides controlling the release in the open market by the millers as well to keep healthy the supply-demand equilibrium.
Despite a glut in the previous two years, the price of sugar has risen in the last year by approximate Rs 500 a tonne over the year leading to accusations of the market running on too much 'asymmetric information' - skewed market control in other words or a greater influence of middlemen to be obvious. Congress would be loath to go with the decontrol option if there is any scepticism about its impacts on the Wholesale Price Index-based inflation in which sugar holds a substantial value. With inflation already touching the 12% mark, and the party staring at assembly elections in crucial states as well as a general election by the end of financial year, the food basket prices have attracted the highest political outcry by opposition BJP and Congress's erstwhile partner Left and is bound to become a key poll plank....The Times of India
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