Bank PO Descriptive Paper Question: Steps to Control Sugar Prices

December 20th, 2009

Last Updated: January 31, 2012

Question: Recently we read in the newspapers that Domestic sugar prices in India have surged by almost 80-90 per cent in 2009. Elucidate some steps taken by Central Government of India to control the sugar prices"
Answer: India is the original home of sugarcane and sugar. India is the second largest producer of sugar in the world after Brazil and produces more of cane sugar and not beet sugar. India produces approximately 22 million tons of sugar annually, with Maharashtra contributing over one-third of it. In the recent times the prices of sugar have touched the sky and prices have surged by almost double in this year. The following are some steps taken by Govt. of India to augment domestic stocks of sugar and to contain sugar prices:

Import of raw sugar has been allowed under Advance Authorization Scheme by sugar mills at zero duty (upto September 2009)
Import of raw sugar was allowed at zero duty under OGL (Open General License) (upto August 2009) by sugar mills which was later extended upto December 2010.
Import of raw sugar has been opened to private trade upto March 2010 for being processed by domestic factories on job basis. This has been further extended upto December 2010.
Import of white/refined sugar by STC/MMTC/PEC and NAFED was allowed upto 10 lakh tonnes by August 2010 under O.G.L. at zero duty. This was extended upto March 2010.
Duty free import of white/refined sugar under OGL has been opened to other Central/State Government agencies and to private trade in addition to existing designated agencies upto March 2010. The cap on imports has also been removed.
Levy obligation has been removed in respect of all imported raw sugar and white/refined sugar.
White/refined sugar has been also allowed to be sold at the discretion of the importing organizations, but the sugar processed from imported raw sugar is subject to accelerated releases.
An additional special festival allocation of 2 kg of levy sugar only for the month of September/October, 2009 has been made to all BPL as well as APL cardholders presently covered,
The levy obligation on sugar factories has been enhanced from 10% to 20% of production w.e.f. 01.10.2009 for the 2009-10 sugar season.
Central Government has imposed by placing stock holding and turnover limits to moderate prices of sugar by placing stock-holding and turnover limits on sugar dealers for a period of four months, and thereafter for another period of six months i.e. upto 08.01.2010.
Khandsari sugar has now been brought under the ambit of stockholding and turnover limits.
stockholding limits were imposed since August 2009 on those who are using or consuming more than ten quintals of sugar per month as raw material for production or consumption or use, stipulating that such bulk consumers shall not hold sugar stock exceeding fifteen days of their requirement.
Futures trading in sugar on NCDEX has been suspended with effect from May 2005.
The Essential Commodities (Amendment and Validation) Ordinance, 2009 has been promulgated on 21.10.2009 with a view to remove the defects and ambiguity in the existing law and to clarify provisions pertaining to the determination of price of levy sugar and also to validate the actions taken by the Central Government for fixation of price of levy sugar under the specified orders effective from 1.10.1974.
The concept of ‘Minimum Price’ has been replaced by ‘Fair and Remunerative Price’ (FRP) of sugarcane to provide reasonable margins to farmers on account of ‘risk’ and ‘profit’ which is to be uniformly applicable in all States.
The amendments to the Sugarcane Control Order, 1966 have come into force from October 2009.