A high-level government panel has recommended a radical overhaul of the sugar market, including partial indexing of cane prices to the retail price of the sweetener and relaxing restrictions on setting up of sugar factories. If implemented, the measures will reduce government intervention, usher in competition and make at least a section of the farmers happy with the ruling United Progressive Alliance. The panel, headed by former Reserve Bank of India governor C. Rangarajan, was constituted in September and is expected to submit its report to the Prime Minister next month. It was set up to provide a road map for addressing structural problems underlying volatility in sugar prices, a politically sensitive issue. At present, the sugar market is controlled, with the government deciding several factors from the price of cane to the quantum of offtake of sugar from the mills. To be sure, cane prices vary across the country as individual states fix the procurement price. The committee is now proposing that to begin with, the government should move to a uniform pricing regime that will prevent state governments from determining the sugar cane price. This has often been a politically contentious issue with the strong farmer lobby in states such as Uttar Pradesh, which is due to go to polls in 2012.
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