State to buy seized sugar at Rs20 per kg and sell it in the open market.
Here’s some sweet news for Mumbaikars reeling under the spiralling cost of sugar. The state government has agreed to sell the two lakh quintals of sugar it had seized from various traders last year. This means more sugar in the market, which will automatically push down prices. However, traders feel they are being forced to swallow a bitter pill.
The government on Wednesday submitted to the court that it would either pay the state treasury or deposit with the court the cost of the sugar at Rs20 per kg. The traders want at least Rs35-37 per kg.
In the largest seizure in the country, the government had confiscated the two lakh quintals from various traders alleging violations of the Essential Commodities Act, 1955. The EC Act gives state governments the power to control production, supply, distribution, etc of essential commodities for maintaining or increasing supplies and for securing their equitable distribution and availability at fair prices.
The state government had contended that the sugar was being transported outside the state without the requisite permissions.
Public prosecutor PA Pol told the court that at the time the sugar was seized in July last year, it cost between Rs19-23 per kg.
However, the current market price of sugar is Rs45 per kg. Pol said the government’s rate for above the poverty line sale was Rs20 per kg and below the poverty line rate was Rs13.50 per kg.
The court was hearing a bunch of 200 petitions filed by various traders from around the country seeking quashing of the resolution of August 28, 2009, directing the disposal of the seized sugar in seven days.
The traders, however, refuse to accept the government’s offer of Rs20 per kg. Sources on the traders’ side told DNA that they were expecting at least Rs35-37 per kg from the government.
The government, however, is not keen on paying the traders till the court passes a final order in the case and has said it will deposit the money at their given rate in the state treasury or the court.
On February 4, DNA was the first to report the high court’s suggestion to the state government to buy the seized sugar and sell it in the open market instead of letting it go to waste. The court is likely to pass a common order in all the petitions on February 26.
Why did sugar prices rise?
The sky-rocketing prices of sugar can be traced first and foremost to the fact that acreage under sugarcane has shrunk in recent years, reversing a trend that saw a steady increase in area under the crop since the 1950s. In 2006-07 acreage had peaked at 5.15 million hectares.
Secondly, last year’s weak monsoon compounded the problem, causing a 20% shortfall in production and even more by a questionable trade policy — incentives for sugar exports at a time when global prices were at rock bottom and imports were at a 28-year high.
Exports continued even after the shortage began to be felt and interventions, that may have stabilised prices, were delayed, allegedly for political reasons.
While policy failures have exacerbated the problem, the main fact is that farmers are opting out of sugarcane because it is no longer economically viable.
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