While the state government of Maharashtra is yet to decide over the demand from the state’s sugar industry to grant mills a transport subsidy of Rs 1,500 per tonne for sales outside its borders, the sugar industry in Uttar Pradesh has said seeking transport subsidy amounts to protectionism, and that such a decision has the potential to disturb trade in the country.
CB Patodia, president of the Uttar Pradesh Sugar Mills Association, has written to the secretary, Food and Public Distribution, that sugar is an essential commodity sold freely without trade barriers from sugar-producing states to consuming states, and a transport subsidy would provide an unfair advantage to Maharashtra.
“Not only will the sugar sale in UP suffer, the cane price payments to millions of farmers shall be jeopardised,” the letter said. A unilateral incentive or rebate will vitiate the market dynamics and major sugar-producing states shall have a great disadvantage, it said.
The letter said sugar is a highly price-sensitive commodity and the component of transport cost in overall pricing determines the market acceptance and geographical location of the buyer. Traditionally, UP’s sugar mills sell their produce in the eastern and northeastern parts of the country. “Over a period of three to five years, production volumes have gone up in the state, while consumption of sugar has not seen much change. As a net sugar surplus state, it is incumbent on UP to sell its sugar outside and into its traditional markets,” it said.
The letter said it is also requesting the UP government to provide a similar rebate/ incentive to sugar mills in the state so that they can survive in the marketplace. “In a free market regime, where sugar flows freely from one end of the country to the other end, what is the need to give protection to one’s produce? Secondly, Maharashtra should be looking at markets that it has been doing business in traditionally and which are closer to it geographically. Why do the sugar mills of Maharashtra want to increase their transport expense? What is the logic in going to markets that are far off, for which they are demanding subsidy?” the letter asked.