Industry gives wish-list to decontrol sugar sector

With large sugar production expected in the ensuing 2010-11 crop year, the two key industry bodies opined that it was the appropriate time to decontrol the sugar sector

Seeking freedom from government control, the sugar industry today asked the Centre to purchase the sweetener from open market for supply through ration shops and end the monthly quota system for sale, reports PTI.

The Indian Sugar Mills Association (ISMA) and the National Federation of Co-operative Sugar Factories (NFCSF), the apex bodies, today submitted their wish-list to the food ministry — a day after food and agriculture minister Sharad Pawar said that the ministry would finalise its decontrol proposals in the next 10 days.

Under the levy system, mills are required to contribute 20% of their production to the government for sale under the public distribution scheme (PDS) at a price determined by the Centre generally lower than the market price.

"With large sugar production expected in the ensuing 2010-11 crop year, it would be the most appropriate time to decontrol the sugar sector," ISMA deputy director general M N Rao told reporters in New Delhi at a press briefing jointly addressed by ISMA and NFCSF officials.

The industry assured that decontrol would not lead to any rise in sugar prices.

The four-point proposal mooted by the industry includes doing away with monthly release mechanism, PDS sugar to be procured from the market, removal of sugar from the purview of the Essential Commodities Act and cane price to be fixed on the basis of realisation from sugar and its by-products.

Interestingly, the industry wants that the practice of reservation of cane area and distance norm between two mills should continue.

"Cane being a perishable raw material, assured supply of adequate cane within reasonable distance is necessary for the mutual benefit of mills and the growers," ISMA reasoned.

However, some differences appear in the industry over this issue with some mills demanding that there should be no reservation on sugarcane area, as this would lead to competition among mills for buying cane from farmers.

The food ministry fixes the monthly quota for sale in the open market as well as supply under PDS through release mechanism. Mills are required to take release order for exports as well.

On cane price, the sugar industry said that the rate should be fixed based on the realisation from sugar and its by-products instead of the current practise of setting rates accounting the cost of production and transport charges.

"For this, we suggest globally benchmarked price-sharing formula of 62% to cane farmers and the balance 38% to the sugar mills," it said.

ISMA and NFSCF said sugar should be removed from the purview of the Essential Commodities Act because the maximum quantity of sugar is consumed by bulk consumers and not by households. Due to this reason, the weightage of sugar in the wholesale price index (WPI) has also been reduced to 1.67% from 3.62% earlier, they added.

According to a study by A C Nielson, nearly 74% of sugar consumption is accounted by bulk commercial users of beverages and biscuit makers and the balance 26% by households, they said.

While freeing the sugar market, the government should do away with stock holding limits on bulk consumers, they added.

Suggesting a long-term import-export policy, the industry said government should allow import of only raw sugar in times of production shortage and "the policy should enable India emerge as reliable exporter of sugar in long term."

Besides, the duty structure on imports should be calibrated in a manner to ensure payment of competitive cane price to farmers vis-à-vis other crops so that the country is self-sufficient.

India, the world's second largest producer but the biggest consumer, is estimated to have sugar production of 19 million tonne in 2009-10 crop year (October-September) against the annual demand of 23 million tonne.


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Oil regulator gets powers to issue gas distribution licences

While the Petroleum and Natural Gas Regulatory Board came into existence in October 2007, Section 16 of the PNGRB Act, which gives the regulator the power to issue city gas distribution licences, has been notified with effect from 15July, 2010

Nearly three years after the oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) came into existence, the government has notified a crucial section that now give the watchdog explicit powers to issue city gas distribution (CGD) licences, reports PTI.

Section 16 of the PNGRB Act of 2006 has been notified with effect from 15th July, official sources said.

The PNGRB, which is to regulate the petroleum product and natural gas sector, came into existence in October 2007 but Section 16 of the Act was not notified by the government.

The section gives PNGRB powers to authorise companies to retail compressed natural gas (CNG) to automobiles and piped cooking gas to households.

Sources said PNGRB, however, did not feel constrained by absence of Section 16 and held two rounds of bidding for giving city gas distribution rights.

In March last year, it conducted the first round for six cities — Kakinada in Andhra Pradesh, Mathura and Meerut in Uttar Pradesh, Kota in Rajasthan, Dewas in Madhya Pradesh and Sonepat in Haryana.

GAIL Gas Ltd, a wholly-owned subsidiary of GAIL India, swept the round bagging five cities. Bhagyanagar Gas Ltd, an equal joint venture of GAIL and Hindustan Petroleum Corp, got the sixth city of Kakinada.

In the second round in August, PNGRB invited bids for seven cities, including Ghaziabad, Allahabad and Chandigarh.

Indraprastha Gas Ltd, which claimed it had central government and Supreme Court authorisation for retailing CNG and piped gas in Ghaziabad, challenged in the Delhi High Court (HC) the PNGRB's authority to issue licences in absence of the Section 16.

The high court in January ruled that PNGRB had no powers to issue city gas authorisation, leading to scrapping of the second round.

After the HC ruling, the authority to issue CGD licenses fell on the central government which authorised winners of the first round of auction conducted by PNGRB and explicitly gave the licence for Ghaziabad to IGL, they said.

Armed with the Section 16, the regulator is likely to come out with a third round of auction this month. Six to seven cities may be offered in the round, sources said.


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