Sharad Pawar's loss, a sweet turn

The fallout of the recent by-elections, where NCP leader Sharad Pawar lost his once-invincible Khadakwasla, Pune seat, is all too visible.

The agriculture minister has since announced that he might allow sugar to be exported on a monthly basis and even said he is actively considering decontrol of the sugar sector.

Sugar decontrol essentially means the companies will be allowed to operate without curbs —- they can sell wherever they want, domestic or overseas, at whatever price they deem fit and not be asked to sell to the government at ridiculously low prices.

This is not the first time the government has spoken about sugar decontrol. Yashwant Sinha had broached it in his budget speech way back in 2001.

However, nothing has happened since and nothing is likely to happen in the near future.

With inflation continuing to remain high, it is unlikely the finance ministry will agree to a proposal that will keep prices high.

Further, price volatility and hoarding are issues not uncommon in this commodity.

Interestingly, the industry is only asking for a partial decontrol - it doesn’t want a decontrol of the raw material, which is cane sugar.

Currently, mills have a monopoly on supplies within a radius of 15 km for the plant. Farmers have to supply to these mills.  If cane prices are freed, farmers will have a choice to go to the highest bidder, in which case the bigger companies will score over cooperatives.

Also, when prices of finished products are low, especially since imports will have to be opened up in decontrol, the same mills will want the government to intervene.

Given these complex variables, it is unlikely this politically sensitive sector will be freed soon.

Sugar counters saw increased volume and a small rally on Wednesday. However, this rally is expected to be short-lived. What can result in a sustained move is perhaps an increase in export quota and higher international prices.