THE SUGAR SECTOR is always in the news, more often for wrong reasons. Just how ham-handed the Central Government has been in exercising control over this important segment of the country's expanding food processing sector is demonstrated by the recent quashing of the Centre's 1998 delicensing order by the Allahabad High Court on the ground of lack of authority vested with the Executive. The verdict has sent shock waves through the industry circles. But what seems more ludicrous than shocking is that investors in new capacities failed to carry out the usual due diligence exercise before putting in the money. Perhaps, continuing government patronage and active involvement of influential politicians made investors presumptuous about licensing condition.

Over 40 mills, it is thought, would be affected by the court ruling, of which 16-17 are in Maharashtra and six in Uttar Pradesh — the two largest producing States — with the rest scattered all over the country. These mills have to get the capacity regularised, a process that is bound to be tortuous, but potentially `rewarding' for those involved in the clearance. The development could not have come at a more inappropriate time, particularly for cane growers and the new mills set up in UP as the State is poised to harvest a large sugarcane crop. Any restriction on the purchase of cane by the new mills is sure to affect hurt the marketability of cane and, in turn, hurt the growers. It can also push up the open market prices of sugar which already are far from consumer friendly. Huge investments flowing into building modern sugar mills cannot be forced to remain unproductive. At the same time, the grievance of the established mills that the new facilities encroach on their spatial monopoly over cane (protected by the zoning restriction of 15 km) cannot be overlooked. A practical solution would be to ensure cane supplies for the established units and allow the new ones (unlicensed units) to access what is surplus. This will protect the interest of all the stakeholders and not distort the marketplace.

The sugar industry is also in the news for the unseemly controversy involving Maharashtra and UP mills over the grant of concessions for attracting investment in the States and aggressively marketing sugar outside their territories. Sugar from UP now finds its way into markets that have traditionally been Maharashtra's. Concessions given by the UP Government are under attack. Far from being an ideal solution, imposing restrictions on UP sugar could be politically damaging. The sugar industry needs visionary leadership that can work towards building long-term competitiveness in a free market condition. Mills as a whole — public, private and cooperative — have to ponder over their future. Continuing controls may help some mills or some regions, but the sugar industry at large will be the loser. The industry needs and deserves freedom. It has to learn to survive and flourish under competitive conditions. Developed economies can afford to spend $6 billion every year to subsidise the sugar sector; but we can hardly afford that, nor does the Indian industry need that kind of support because of its low production costs. Regrettably, there is no indication as yet that decontrol will take place on October 1, as scheduled.

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