India Ends State Controls on Sugar Producers After Four Decades

India, the world’s second-biggest sugar producer, ended state controls on sugar mills, allowing them to freely sell the sweetener in the local market for the first time in four decades.

The cabinet at a meeting headed by Prime Minister Manmohan Singh also decided to stop buying sugar from producers at below market price to supply to the poor, Food Minister K.V. Thomas told reporters in New Delhi today. The government will still subsidize sales to the poor through September 2014, he said.

Bajaj Hindusthan Ltd. (BJH) and Balrampur Chini Mills Ltd. (BRCM), the nation’s biggest mills, and other producers may earn about 30 billion rupees ($546 million) annually with the abolition of state purchase of sugar at below market price, the Indian Sugar Mills Association said in an e-mailed statement. A government panel in October recommended scrapping state controls including limits on sales by the mills, first introduced in 1972.

“These much awaited reforms will reduce the cost of production and improve liquidity with millers which, in turn, will ensure better and timely payment of the cane price to the farmers,” the association said. “These two important reforms will go a long way in improving efficiencies both at farm and mill level and make Indian sugar competitive in the international market.”

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