Mumbai: The sugar industry has asked the government to let the market govern the prices of the sweetener, by partially decontrolling the industry and re-introducing sugar futures trading.
“On account of the potential supply-demand mismatch, the government should let the prices be governed by market forces through partial decontrol of the industry and re-introducing sugar futures trading,” Murugappa group vice-chairman and director (strategy) A Vellayan said.
With hopes of economic recovery strong because of a stable government, industry captains are looking forward to a favourable budget this year.
International crude prices have again reached $70 per barrel, indicating a greater probability of sugar manufacturers of Brazil switching to ethanol production, thus creating a shortage in the international market.
It is important to ensure that the supply-side restriction does not lead to domestic shortage, Vellayan said.
The government should provide subsidized natural gas to sugar refineries and introduce fiscal benefits for new technology investments and working capital requirements. This will guarantee a reasonable availability of stocks at all times for the domestic market, he said.
Among other key expectations of the industry is that the government should do away with the release order mechanism, which may create supply shortages and push up prices, instead of importing high-cost white sugar, he said.
Vellayan also asked for improving efficiency in the sugar industry.
The government should introduce a package for reviving sick units through disinvestment. Power cogeneration is another issue in which the government needs to give a level-playing field by allowing market-determined prices, he said.
The world sugar industry is concerned over the delay in the Indian monsoon and Indian output trailing estimates in the next sugar season, which will lead to price rise.
India, which has a strong appetite for sugar after a dismal domestic harvest, has helped drive up raw sugar prices sharply by 50-55% compared to June 2008. India may import as much as 3 million tonnes of sugar in the year ending 30 September, Indian Sugar Mills Association (ISMA) director-general S L Jain had said earlier.
Vellayan pointed out that the growth of the agri-industry has been constant over many years at 2.5% and the stock of foodgrain against use ratio is becoming thinner, clearly indicating depletion in buffer stocks.
To infuse dynamism into the sector, the government should introduce a comprehensive package, which covers irrigation, farm input usage, viability of industrial units involved in farm input supply and other services, Vellayan said.