More Stories

Informist, Friday, Aug 30, 2024

 

By Afra Abubacker

 

NEW DELHI – By defining raw sugar in the draft amendment of the Sugar (Control) Order, the government has proposed allowing the sale of this variety in the domestic market. However, this may run into a regulatory hurdle as the Food Safety and Standards Authority of India does not deem raw sugar fit for human consumption. The Department of Food and Public Distribution has sent a copy of the draft amendment to the food safety authority seeking comments. "We don't want the industry to face hurdles from FSSAI later," a senior government official said.

 

Raw sugar is an unwashed centrifugal sugar, which is majorly exported or sold in the domestic market to refineries. "Sugar Control Order can't decide what is suitable for consumption. Statutory quality standards have to necessarily remain in the domain of FSSAI," said G.K. Sood, a farm expert. 

 

The previous order did not have definitions of many sugar varieties and by-products. The draft "corrects that lacunae", he said. Sood also observed that most definitions are adopted from the Food Safety and Standards Authority of India and the Factories Act. 

 

On Aug 22, the Department of Food and Public Distribution had issued a draft Sugar (Control) Order 2024, merging Sugar (Control) Order 1966 and Sugar Price control order 2018. The draft proposed amending the regulations regarding production, sales, storage, and pricing of sugar and other sugarcane by-products. The draft proposes to replace the existing Sugar (Control) Order, 1966.

 

Though millers have welcomed the inclusion of raw sugar and khandsari sugar units to the order, they are apprehensive that the draft order might bring more stringent regulations for the sector. The industry will study the draft and discuss "if it is just a fear psychosis or real," an industry official said. 

 

"The 1966 order was implemented during a period of severe sugar shortages, necessitating rationing, and price controls throughout the supply chain," said MEIR Commodities, a leading Mumbai-based agri-trading house in alliance with London-based MAREX, on social media platform, X.

 

"However, given today's ample sugar supply and the cautious approach to sales beyond quotas to avoid over supply, such stringent controls are not required," it added. The government fixes the maximum quantity of sugar that can be sold by millers every month to support prices and help mills clear the arrears of sugarcane farmers.

 

Government officials, however, say the draft amendment brings no major additional regulations, and it only intends to standardise rules and bring in "uniformity and transparency to the sector," an official said.  

 

The draft amendment calls for increased compliance in data disclosure. The government has been pushing sugar mills to digitise their operations using Enterprise Resource Planning software to bring transparency and efficiency in the sector. The software manages all details of making sugar from harvesting, cane procurement, pricing, transporting, billing, budgeting, and cane inventory management, among others. 

 

"ERP (Enterprise Resource Planning) has been around for decades, so most sugar factories would already have it and others should not hesitate to use it in the interest of efficiency that it can bring,” Sood said. "This will enable integration of data needed by the government directly from the mills' server, eliminating errors and effort in incorporating data in official reports manually," he added.

 

The draft also seeks to update the six-decade old order by incorporating more varieties of sugar and by-products to reflect the growth in the industry's product basket. Apart from raw sugar, the draft order defines by-products like sugarcane juice, B-heavy molasses, and C-heavy molasses used in ethanol making. Compressed biogas, potash-based fertiliser, press-mud, bagasse, and electricity produced from the bagasse are the other by-products named in the order. 

 

Molasses is defined in the draft so that the government can "issue directions regarding the use of A- or B-heavy molasses which contain recoverable sugar," Sood said. Amid concern over lower sugar production, in December, the government had restricted sugar diversion for ethanol output to around 2.5 mln tn to ensure sufficient sugar availability in the country. During 2022-23 (Nov-Oct), mills had diverted 3.8 mln tn of sugar for ethanol production. 

 

On Thursday, the government said sugar mills can freely divert sucrose from all sugarcane-based feedstocks for ethanol production in 2024-25 (Nov-Oct). Though it did not announce any upper limit on sugar diversion, the notification clarified that the government would periodically review sugar diversion and sugar production to ensure sufficient availability of the sweetener in the country. 

 

Citing the Rangarajan Committee's recommendation on deregulating the sugar sector, an industry official said the draft order is "contrary to the Rangarajan Committee". The committee's findings were in favour of decontrolling the sector from government intervention and found that the disparity between the sugarcane prices fixed by the Centre and state governments distorts the market. In 2012, Prime Minister Manmohan Singh had set up a committee under Dr. C Rangarajan to look into all the issues relating to the deregulation of the sugar sector. 

 

Key sugarcane-growing states announce state-advised prices, while the Centre sets the fair and remunerative price. Both prices are paid by sugar mills to farmers on sugarcane purchases. Apart from Uttar Pradesh, states such as Haryana, Punjab, and Uttarakhand also intervene in sugarcane pricing by announcing state-advised prices, which are usually higher than the fair and remunerative prices. The sugar mills located in these states are mandated to pay farmers according to state-advised prices. 

 

Though the draft Sugar (Control) Order included khandsari sugar units, government officials stressed only large-scale factories would be regulated. "Only big khandsari units with 500 TCD (tn of sugarcane crushed per day) and above will be regulated. We need to ensure farmers are paid FRP," the government official said. 

 

Stressing timely cane payments, another senior official said that the "financial health of sugar mills is important to us as it is directly related to cane payment." The government fixes fair prices of sugarcane, monitors cane payments, and penalises defaulting factories.

 

Welcoming the move, a sugar factory official said, "The same sugarcane is being poached. They (khandsari units) are happily picking up our sugarcane with no FRP." However, Sood pointed out that the khandsari units buy only 2 mln tn sugarcane to make about 200,000 tn of khandsari sugar. Sugar mills crushed more than 300 mln tn cane to produce about 33 mln tn white sugar in 2023-24. 

 

Sood also observed that to bring khandsari sugar units under the purview of the Centre and mandate fair price cane payments, the government will have to amend Sugarcane (Control) Order, and not just Sugar (Control) Order. 

 

The draft order only intends to "empower the authority to issue directions" to regulate, and "it should not be understood that with the promulgation of the Order, all these aspects will stand controlled," Sood added. 

 

Officials said that the government is open to all valid suggestions and feedback from the industry, provided it is "wholesome" and applicable for the "long term". The industry is set to review the draft on Sep 14 in Pune, Maharashtra, and submit a common memorandum to the government. End

 

Edited by Akul Nishant AKhoury

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation. 

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2024. All rights reserved.