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Rangarajan-led expert committee recommends total decontrol of sugar industry: report

New Delhi: An expert committee on sugar decontrol, led by Prime Minister's Economic Advisory Council Chairman C Rangarajan, has suggested the total decontrol of the sugar industry by removing the cap on levy sugar, release mechanism and freeing restrictions imposed on export-import of the commodity, the Business Standard reported Tuesday, citing an unidentified person.

The committee has also proposed a profit-sharing system for farmers to reap in the benefits of high sugar prices, and advocated using the government's fair and remunerative price (FRP) as the base rate for sugarcane, the daily said.

Fair and remunerative price, the minimum price that sugarcane farmers are legally assured, for the marketing year 2012-13 beginning October is at Rs 170 per quintal, media reports had said. The FRP for the ongoing marketing year is at Rs 145 per quintal.

The Rangarajan-led expert committee, which was formed earlier this year by the Prime Minister's Office (PMO), had submitted a brief of the report on sugar deregulation to the food ministry last week, media said.

Sugar is one of the most regulated industries in India. Previous attempts to deregulate the industry were made in 1971-1972 and 1978-1979, only to be rolled back following strong opposition from various political parties.

While the government has loosened its grip over major industries like steel and cement, sugar continues to be a highly regulated sector, with mills being allowed to sell only in the open market as per the release orders issued every month by the directorate of sugar in the Union government.

"It (committee) has also suggested the current minimum distance of 15 km between two mills be removed. The most important suggestion is on sugarcane pricing that can in effect mean an end to states' power to set a different and higher price," the unidentified person familiar with the matter told the paper.

The report has also suggested that the state governments should purchase sugar for PDS (public distribution system) from the open market and the government should pass on the cess of Rs 24 it collects on every quintal of sugar to state governments to finance market purchase.

Notably, the highly sensitive topic of area reservation and pricing of sugarcane has served as a political tool for states like Uttar Pradesh, with its Chief Minister Akhilesh Yadav strongly opposing the deregulation of sugar during his meet with Rangarajan last month, media said.

Meanwhile, sugar industry bodies Indian Sugar Mills Association (ISMA) and National Federation of Cooperative Sugar Factories, have also been demanding the decontrol of the sector.

Sugar price has gone up by almost 15-20% in the last one month in most parts of the country, with the prices of retail sugar rising by Rs 5 per kg since July. Currently, sugar is priced in the range of Rs 39-40 per kg in New Delhi.

India, the world's second largest sugar producing country, is also the world's biggest consumer of sugar and requires around 2.8 million tonnes of levy sugar annually.