Sugar Industry Fears New Norms May Stifle Growth and Innovation
The Indian sugar industry is currently facing a significant challenge as it grapples with a draft amendment to the nearly six-decade-old regulation governing production, storage, and pricing of sugar. Industry players fear that the proposed changes may reintroduce some of the controls that have been gradually phased out over the years, contradicting the recommendations of the Rangarajan Committee.
The Ministry of Consumer Affairs, Food, and Public Distribution has proposed the draft “The Sugar (Control) Order,2024,” citing technological advancements in sugar production as a reason to update the existing Sugar (Control) Order,1966. However, the sugar industry is concerned that the new regulations may stifle growth, innovation, and competition within the sector.
The National Federation of Cooperative Sugar Factories (NFCSF) has planned a national-level brainstorming session with other industry associations to discuss the draft and formulate a joint response before the September 23 deadline. One of the key contentious points is a provision that empowers the Centre to direct producers to package sugar in jute bags. This provision is seen as a direct contradiction of the Rangarajan Committee’s recommendations for a gradual phasing out of mandatory jute packaging for the sugar sector.
In addition to the packaging requirement, the draft was formed by merging the Sugar Control Order of 1966 and the Sugar Price Control Order of 2018. The latter empowers the Central government to set the minimum selling price (MSP) of sugar.While some industry executives view this as a positive development, as it simplifies the Act, others express concerns about the potential for exploitation and misuse.
The provision that empowers the Centre to ask for information in a digital format from sugar producers or dealers and requires them to integrate their digital systems with the Centre’s system for data authenticity and compliance could give the government real-time information on sugar production and by-products. However, some industry players worry that this could also open the door for exploitation and misuse of data.
The draft also includes a provision that grants the central government the authority to regulate the price of sugar.The draft states that the Centre will consider the Fair and Remunerative Price (FRP) plus the average and approximate conversion cost for sugar production and revenue from by-products when issuing pricing orders. This is seen as a departure from the old method, which included interest and depreciation in the calculation of sugar pricing.
The draft also states that the FRP will be taken into consideration for pricing orders, potentially putting mills that follow the state-fixed Advised Price (SAP) at a disadvantage. These mills, primarily located in states such as Uttar Pradesh, Haryana, and Punjab, frequently have SAPs that exceed the FRP.
While the draft has some positive aspects, such as bringing the unorganized ‘gur’ and ‘khandsari’ sectors under the ambit of the sugar control order, industry players also express concerns about provisions that could hinder new product development or create unfair competition. For instance, the provision that brings under the Control Order any other alternative product affecting sugar production from sugarcane could potentially limit innovation and product diversification.
The sugar industry is wary of the potential consequences of these amendments.While some provisions may be beneficial, others are seen as a step backward in terms of deregulation and market-oriented policies. The industry is urging the government to carefully consider the concerns raised by stakeholders and make necessary modifications to ensure a balanced approach that promotes growth, efficiency, and fair competition within the sugar sector.
The Potential Consequences of New Regulations
The proposed regulations could have far-reaching consequences for the sugar industry in India.If these regulations pass, they could:-
Stifle Innovation: The industry fears that the new regulations could hinder innovation and product development, limiting the ability of sugar producers to adapt to changing market conditions and consumer preferences.
Create Unfair Competition: Some provisions in the draft could create an uneven playing field for sugar producers, potentially favoring larger companies or those with stronger political connections.
Reduce Exports: The new regulations could make it more difficult for Indian sugar producers to compete in the global market, reducing exports and limiting foreign exchange earnings.
Increase Costs for Consumers: If the new regulations lead to higher production costs, they could ultimately result in higher prices for consumers.
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