It is necessary to correct some inaccurate information and conclusions given by the author of the recent article Sugar-coating subsidies (FE, March 15, http://goo.gl/rea6ZJ). Let us understand that the Indian sugar industry basically produces white sugar, which gets consumed domestically. Any surplus, which comes up once in a while, is exported. That situation has changed in the last few years. With sugar refineries mushrooming globally, including in countries where India exports white sugar, the import demand now is more for raw sugar. Additionally, the standalone refineries in Indiaat Kandla, Haldia and Kakinadawould henceforth require 1.5 million tonnes of raw sugar. Adequate production of raw sugar could give India access to the Indonesian market, which imports over 3 million tonnes of raw sugar annually.
Considering that we have produced surplus sugar continuously during the past four years, it has become necessary for Indian mills to produce raw sugar. Thus, the governments decision to incentivise raw sugar comes at the right time to ensure that the Indian sugar industry has a diversified product mix.
Now to rectify the wrong information in the above-mentioned article:
The gazette notification of February 28, 2014, clearly states that the amended SDF rule shall come into force on the date of their publication in the Official Gazette. There is no retrospective application from February 1, 2014, as claimed by the author.
Para 3 of the notified rule covers refined sugar exports, provided that domestic raw sugar supplies are used for the same. The incentive is not an export subsidy but an incentive to millers to embark on production of raw sugar. It says that to be eligible for this scheme, licence holders should get their imports invalidated, thereby encouraging raw sugar import substitution. Again, brilliantly thought out by policymakers.
The article calls the policy discriminatory in favour of few holding the licence. Paras 7 and 8 of the rule provide for prior registration with DGFT, without any prohibitions, giving equal opportunity to all. All refiners can obtain licences, provided domestic raw sugar supplies are refined by them.
The Sugar Cess Act, 1982, provides for a cess on the sugar produced by mills and the SDF Act, 1982, clearly states that the funds thereof are to be utilised for the development of sugar industry and for matters connected therewith or incidental thereto. Yet the article suggests that SDF is funded by the Indian consumer and is meant for the benefit of the consumer. Mills