Eased export restrictions will cheer sugar producers—but removing this relic from the past is the real fix India needs

2 months ago 4

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A revamped law on sugarcane production is necessary so that farmers get fair prices for their produce based on the purpose for which it is used. (Bloomberg)

Summary

India’s sugarcane sector has evolved beyond the days when sugar was its sole product—yet the law governing it hasn’t. As the government reviews this outdated framework and eases export curbs, the real test will be if it can let market forces, not controls, drive growth and fair prices for farmers.

Share prices of sugar companies surged on Monday, with one clocking double-digit gains, after the government raised the annual allocation for exports to 1.5 million tonnes and scrapped the 50% export duty on molasses, a by-product of sugar production.

The move follows a piling of sugar inventory after its diversion for the production of ethanol fell short of expectations.

Notably, the government is reviewing a law regulating sugarcane production, Mint reported. This is much needed.

Our domestic regulation was set at a time when sugar was the only major output from cane, but now the industry has diversified to ethanol, electricity, molasses and other uses. So, a revamped law is necessary so that farmers get fair prices for their produce based on the purpose for which it is used.

Further, the lowered export barriers would allow the industry to benefit from overseas prices. Unfortunately, the government has been using export control measures as a policy tool. These are relics of the pre-liberalization era that should be discarded.

Businesses need the freedom to modulate supplies based on price signals. The less the government interferes, the better it is.

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