The government on Thursday decided to decontrol sugar, meaning that the manufacturers of the product can take a decision on pricing without government intervention. However, one of the riders was that there will be no levy obligation on sugar mills for two years.
Levy sugar is amount of sugar which is set aside from the total production for Public Distribution System (PDS).
Here is the edited transcript of the interview
Q: There is no excise and KV Thomas, the food minister, has said that the levy obligation has been done away only for two years?
A: I am surprised and I am not at all happy if that is the decision. It doesn't make economic sense to take away levy sugar burden from the industry for two years and bring it back after that. It doesn't make any sense at all because you are going to change the machinery, you are going to tell the state governments to develop their machinery and buy it from the open market and then again tell them let the sugar industry supply that. It doesn't make sense.
Also read: Government decontrols sugar, hike in price likely
Q: You were sounding happy a couple of minutes before the minister actually spoke. Would this now actually be a disappointment and would you have preferred to live with the existing system as opposed to now having to change your system for two years and then god know what happens next?
A: No not at all. Two years relief also is some kind of a relief. I don't want the old system to come back, but we need to understand the whole thing. It is very much possible that the central government is actually looking at freezing current subsidies for the next two years at this level and from the third year the state governments could actually do away with the burden. That is a possibility. So, I need to really understand the exact wording of the approval. This was not a proposal, this was never our proposal, so why and how this has been done it is really surprising.
Why two years? What is the reason for two years, what happens in the third year? Are we going to make such big profits that we will be able to subsidise the government programme. It doesn't make any economic sense, any political sense really. Farmers are also suffering. As we are losing Rs 3000 crore, farmers are not getting Rs 2000 crore odd from us. So, it doesn't make any economic sense.
Q: You were suggesting that you think the government would have gone ahead and imposed higher excise duty, which again does not seem to be the case. The government has very clearly said at this point in time there is no higher excise.
A: I said that to you then that I do not think that excise duty is going to go up. This means that the government is going to bear this small burden of Rs 2,500 crore from within the Budget, because the Food Subsidy Bill is going to cross Rs 100,000 crore (hundred thousand crore). Another Rs 2,500 crore for the government does not mean much. So, it is an excellent decision.
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