Introduction of export subsidy and hike in import duty of raw sugar from 15% to 40%: CARE

Sugar industry was partially decontrolled in April 2013 by dispensing levy sugar obligation and dismantling the monthly release mechanism of non-levy sugar.

Sugar industry is the second-largest agro-based industry in India and plays a pivotal role in the socio-economic development of the rural India. The industry is cyclical in nature and the entire value chain is regulated leaving very little scope to the industry to play under free market forces. The excessive control mechanism led the Indian Sugar Industry to grapple under several challenges including mounting debt, squeeze on profitability because of high sugarcane prices fixed by various State Governments, sole dependence on the farmers of allotted area for sugar cane procurement and loss on account of meeting levy obligation at a subsidized price. Based on the recommendation made by Rangarajan Committee, the industry was partially decontrolled in April 2013 by dispensing levy sugar obligation and dismantling the monthly release mechanism of non-levy sugar. Despite that, rising inventory levels, lower exports and slow implementation of the ethanol blending program continued to be the overriding factors affecting the industry. Goverment of India has taken several initiatives for reviving the industry like introduction of export subsidy of Rs.3.3/kg and hike in import duty of raw sugar from 15% to 40%. Though these measures may provide some respite to the ailing sugar industry in the short-term, the real turnaround of the Indian Sugar industry will depend much on the full implementation of the Rangarajan Committee’s recommendation especially implementation of sugarcane price-sugar price linkage formula.