Sweet dreams

Nitish Kumar is on to a sweet thing. Sugar can energise a moribund industrial outlook. As reported in this newspaper, 15 new sugar complexes have been approved by the Bihar government and another six are on their way. The sugar industry has been in decline even though eastern Bihar is ideally suited for sugarcane cultivation. Liberal policies and a single window clearance to attract private mills are expected to change the dynamics; Rs 3,771 crore of investment is already on the cards.

Western UP has already seen the rewards of a similar policy. After the Centre decided to de-license and de-control the sugar industry in August 1998, there has been a boom in sugar prices and it has become attractive for the private sector to invest in sugar mills. In 2004, UP announced a new sugar industry promotion policy to promote investment. The state government announced a host of incentives for sugar companies investing a minimum of Rs 350 crore. This brought 28 new sugar mills to western UP last year, and is expected to bring in another 26 in the next two years. More than Rs 5,000 crores of investment came in and the incomes of sugarcane farmers have jumped.

But the sugar industry needs more liberalisation. For example, farmers are still supposed to sell sugarcane through cooperatives to ensure supply of sugarcane to sarkari mills. These mills do not offer attractive prices, and private mills are not allowed to offer higher prices. The statutory minimum price and the state advised price constrain the movement of the price of sugarcane. Consequently, other incentives have been offered and farmers have found ways to work around the rules and sell to private mills. Freeing up the prices of sugarcane and allowing the export of sugar will properly incentivise the sector. Bihar may even become a big argument for such reform.