Sunday, April 27, 2008

"Let go off all controls, Sardarji (and Pawar boy)"

Why do I welcome decontrol of sugar? Because I have a huge position in sugar stocks in my portfolio :)

That aside, here I found a great ally in that argument. The ET editorial goes controls hurt farmers and industry too. It says our sugar sector has to be freed because –

a) Nearly every aspect of the sugar economy is controlled, often on mistaken assumptions.

b) Ill-timed policies – The govt. banned exports of sugar in 2006 when the global prices were high. That led to a local glut and non payment of farmers’ dues. Govt. can’t fix high cane prices (inputs) and seek to keep product prices low (output) as well. How will the mills pay the farmers?

c) Outdated inflation index - Sugar has to figure low in the inflation index because it is no longer an important household expenditure item. Bulk of the sugar consumption is in the industrial sector. Remove it from the list of essential commodities and treat it like any other product.

d) Meaningless restrictions - Remove distance restrictions between mills. It helps competition and results in efficient price discovery.

e) Lifeline for moneylenders - The statutory minimum price (SMP) for sugarcane and the higher state advised price are fine in theory but do not necessarily protect the farmers. If the mills don’t make profits, they can’t pay farmers on time. This tempts them to get the cane receipts discounted in the market, leaving the local moneylender to make the most of the situation.

So, Dr.M.M.Singh and Pawar boy should sit together and let go of all controls. This is one industry where there is no wastage. Bagasse is used in power generation and molasses is used to make alcohol. Then you have ethanol to mix with petrol to lessen the import bill on crude oil that is inching towards $120 a barrel.

So do it quick. I’ve tipped sugar to my readers earlier. Let me feel like a king :-)

No comments: