Indian sugar industry, which is the world's second largest producer of sugar, often finds itself in the midst of controversy. And this time around, the bone of contention is the complete decontrol of the industry. Will complete decontrol of this sector be a recipe for better realizations for producers?

The issue of sugar decontrol comes now and again into the limelight with some reports indicating the Centre's inclination to free the sugar industry from regulations. However, the Indian sugar industry has for long been disturbed by substandard policy regimes and over-regulation. The government has taken many years without deciding about complete decontrol of sugar. In the government's view, the industry is already partially decontrolled.

Around twelve years back, the Mahajan Committee, headed by former food secretary B B Mahajan,which was set up in March 1997, recommended complete decontrol of the sugar industry in a phased manner. It further recommended that sugar can be taken off the Public Distribution System (PDS) once it is completely decontrolled and that sugar subsidy can be added to the subsidy on food grains supplied through PDS. Five years after the Mahajan Committee's recommendations, in 2003, the government announced complete decontrol of the sugar sector, subject to futures trading in sugar becoming fully operational. But excessive stocks and liquidity crunch faced by sugar mills forced New Delhi to postpone the decision to October 2005. The restrictions on the industry continue till today.

The Indian sugar sector has always been in the news due to several factors. While rising sugar prices affect the consumers, a fall in prices, conversely, affect the feasibility of the units and payment to cane growers. A special purpose vehicle was proposed earlier to control sugar prices that would please the farmers, sugar mills and consumers. However, the proposal mooted lately for total decontrol is welcome, given that it will provide more freedom in terms of production, marketing and export/import trade. According to Prakash Naiknavare, managing director, Maharashtra Sugar Federation, "We have been telling the government to relax the regulations for the growth of the sugar industry, which would eventually benefit the sugarcane farmers." Other industry leaders also believe that the sugar sector will witness more robust, orderly and efficient growth in a completely decontrolled environment.

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