Open Letter to Hon'ble Prime Minister on ill-conceived 'Sugar Control Order'2024'
Prime Minister Office
New Delhi
Subject: The proposed "draft Sugar (Control) Order 2024" is in conflict with Ease of Doing Business.
Hon'ble Prime Minister of India Sh. Modi ji,
The Department of Food & Public Distribution, Ministry of Consumer Affairs, Food & Public Distribution, Government of India shared "the draft Sugar (Control) Order 2024" on the 22nd of August 2024.
The shared document says that the review is due to the technological advancements in the production process,
The document also says there are multiple changes in the sugar sector which necessitates revamping the existing Sugar (Control) Order, 1966.
A copy of "the draft Sugar (Control) Order 2024" is shared for comments/suggestions.
General observation:
At the outset, the undersigned has the following observations.
The "draft Sugar (Control) Order 2024" has not mentioned or highlighted any technological issues which forced this revision of the 1966 order.
The text of the proposed “draft Sugar (Control) Order 2024" contradicts the ‘Ease of Doing Business’ agenda and commitment by the Honorable Prime Minister to the nation.
The text of the proposed “draft Sugar (Control) Order 2024" is against the fundamentals of Natural Justice and Transparency requirements in democracy.
The text proposed in “the draft Sugar (Control) Order 2024" is against the Constitutional provisions related to trade and commerce.
The text of the proposed “draft Sugar (Control) Order 2024" is also against the international treaties signed by the Government of India which are based on predictability and policy stability for the promotion of investment and growth by minimizing political risk.
There is no mention of any technological intervention which led to the proposed draft.
In fact, the order of Sugar (Control) Order1966 was more logical than the proposed order of 2024.
Let me elaborate on my observations section-wise in detail :
Definition: S. 2(a) : "Sugar" means -
i. Any form of sugar containing more than ninety per cent (90%) of sucrose (polarization), including raw, plantation white, refined sugar sugar candy; or
ii. Khandsari sugar, bura sugar, crushed sugar or any sugar in crystalline powdered or liquid form.
Concern:
Why such a vague definition? This shall bring jaggery powder manufacturers in the Sugar Control Order who had already been omitted from the Sugarcane Control Order dated 31.07.2007. This must be clarified in the draft notification itself.
There is no sugar classified at 90% sucrose content.
Definitions at points 2(d) mention white sugar above 99.5% polarization,
Point 2 (e) mentions raw sugar above 96.5%
Point 2.g. mentions khandsari above 96.5%.
Even the BIS and FSSAI standards say the same. Then why the new definition of Sugar above 90% sucrose content is formulated is really a mystery
This ambiguous definition in today's modern technological world will only lead to the prevention of innovations and harassment of entrepreneurs in case they want to develop healthy options for consumers.
These issues must be addressed before finalising the draft and should be recirculated.
Suggestion:
According to WTO Agreements, there should not be multiple agencies fixing standards in any country. In this case, the Sugar Control order should say that FSSAI standards will apply. where FSSAI is silent, BIS will apply.
Please define for example what is the liquid form of sugar as per the proposed Sugar Control Order?
Definition: S. 2(h) "Cane GUR (Jaggery)" :
The preamble of this order is silent on the scope of this order. The vagueness in the draft will cause regulatory uncertainty and misinterpretation among producers, leading to enforcement challenges and harassment.
Suggestion: When Gur is exempted from the order, the definition should not be part of this. Gur will be covered by FSSAI. Please issue clarification in this regard.
Definition: S. 2(i) "Cane Molasses":-
The order defines various grades of Molasses, but with technological developments, there can be many more grades based on the requirements of the market. The proposed definitions are also technologically outdated.
The State's authority over molasses, upheld by court rulings, may conflict with central legislation, leading to litigation. These issues must be addressed.
Concern: The Order is silent on the following and no definition is proposed for them. This should be clarified in the proposed order.
Molasses is an intermediate by-product produced during the production of sugar having purity of molasses between 32.1 percent to 47.9 percent.
Molasses is an intermediate by-product produced during the production of sugar having a purity of molasses between 52.1 percent to 67.9 percent.
The proposed order is silent on these products and these can be made with technological options. This should be clarified.
Definition: S.2(l): "producer" means a person carrying the business of manufacturing sugar and its by-products from sugarcane;
Concern: Whether this definition includes producers not producing sugar but using sugarcane only for other products manufacturing like beverages, ethanol, etc. These products are the main products but not by-products. This should be clarified?
Definition: S. 2(m). "Dealer"
The proposed order is silent on e-commerce and online trading sites.
Concern: Will e-commerce and online trading sites be out of this control order? This should be clarified.
Definition: S. 2(o). "by-products" means any form of product which has been produced during the production of sugar namely ethanol, etc etc
Concern: When ethanol is produced as the main standalone product from sugarcane, it is not as a by-product. Will this Sugar Control be applicable? The preamble of the Control order must be clearly defined. This should be clarified.
Section 3. Power to regulate the production of Sugar:
The Central Government or the State Government with approval of the Central Government, direct that no sugar and its by-products shall be manufactured from sugarcane except under and per the conditions specified in a licence issued on this behalf, whether on payment of a fee or otherwise.
Concern: Is this the attempt to control the Khandsari, Bura production and by-products by the MSME sector? Is this the spirit of 'Make in India', ease of doing business and entrepreneurship development? The objective of controlling the trade of by-products through this order is not clear.
Suggestion: These products use less than 2% of the sugarcane production. This is too insignificant to justify any regulatory intervention hence Khandsari, and Bura production and should be out of the scope of the order because they are consumed by farmers of the livestock sector and by other MSME sectors.
Section 4. Power to restrict the sale, storage, disposal etc. of sugar by producers and Dealers read with Section 5. Power to issue directions to producers and dealers.
The Central Government may direct that no producer or dealer shall sell or agree to sell or otherwise dispose of, or deliver any kind of sugar and its by-products or remove any kind of sugar from the producers'/dealers' premises whether owned or hired or leased, except under and as per direction issued in writing by the Central Government.
Concern:
Is this the attempt to control the by-products used in allied industries, which are also essential in nature, as raw materials like animal feed, food, nutrition, pharmaceutical and cosmetics? The majority of them will be in the MSME sector?
While issuing restriction orders in a given situation, will the government simultaneously permit imports so that allied industries depending on sugar and related by-products continue to sustain their businesses to protect their capital, employment and markets? This must be clarified.
Is this the spirit of 'Make in India', ease of doing business and entrepreneurship development? The objective of controlling the trade of by-products through this order is not clear.
Section 7. Power to regulate the price of sugar -
The Central Government shall, at the time of issuing any Order regarding the price of sugar for sale under clause 5, take into consideration the fair and remunerative price (FRP) of sugarcane, approx. & average conversion cost for production of sugar from sugarcane/beetroot, average revenue realisation from by-products generated in the process of sugar production.
Concern:
Sugar is a cyclical industry and the sugar sector cannot operate without the support of a banking system for working capital. There is a huge interest burden on every sugar mill due to the stocking of sugar and restrictions on sugar movement under the order.
Why is interest cost not mentioned in Section 7? There is no mention in Section 7 of the proposed draft control order that the interest burden will also be factored in while regulating the sugar price. This is a fair and legitimate demand because the banking sector is also regulated by RBI and acts of parliament. This must be added in the clause.
Section 8. Power to regulate the movement of sugar and its by-products:
The Central Government may, by general or special order, direct that no person shall transport or offer or accept for transport by any means of transport, all or [any kind of sugar and its by-products], except under-
(a) a general or special permit issued in this behalf; and
(b) a military credit note
Concern: By-products control will hurt millions of livestock farmers mainly dairy farmers. They are not aware of these controls and it will not be easy to enforce these orders when their livelihood is at stake. This will lead to either corruption or a law and order crisis in rural India. Adding the term “by-products” in this order in the name of controlling sugar movement is a regressive and illogical step. This must be removed.
Section 9. Power to regulate the quality of sugar and its by-products:
(a) The Central Government may prescribe the quality of sugar in terms of Indian Sugar Standard Grades to which all or any kind of sugar should conform at the time of delivery in pursuance of the directions issued to a producer or a class of producers under clause (f) of sub-section (2) of Section 5 of the Essential Commodities Act, 1955, or Clause 5 of this Order.
(b) When the Central Government is of the opinion that any stock of sugar and its byproducts with any producer is below any of the Indian Sugar Standard Grades of sugar, it may direct the producer to reprocess the said stock with a view to conform to one or more of the Indian Sugar Standard Grades of sugar or to sell it only to bulk consumers for use in the manufacture of their products.
Concern:
This section should be just one line. ‘FSSAI standards will apply’, or delete it because FSSAI already exists as a mandatory standard.
Creating another body to define standards is illogical and illegal under WTO. The WTO Agreements on SPS and TBT retract multiple standard-setting bodies to avoid a multiplicity of laws and corruption opportunities.
On one hand, the Hon'ble Prime Minister is trying to reduce the number of laws, but the order is against the national agenda of Ease of doing business and reducing legal hurdles in business. This order is creating multiple regulatory agencies and additional laws which are not even required.
It appears that this is an attempt to create more power centres within the government in place of ensuring ease of doing business. This is a regressive step.
Section 10. Power to call for Information, etc. -
The Central Government or any person authorised in this behalf by the Central Government may, with a view to securing compliance with this Order, or to satisfy itself that any order or direction issued under this Order is complied with,-
(a) require any producer or dealer to furnish within such period or at such intervals as may be specified, such information, returns or reports and in such forms including digital forms, and to integrate their Digital Systems with the Digital system of Central Government through API or any other mode and to allow information sharing of such information already shared with any Government organisation to ensure authenticity of data and compliance, as may be required; and
(b) prescribe the manner in which accounts of any sales, purchases or other transactions of sugar and its by-products should be kept.
Concerns:
Imposing digital record-keeping conditions on small-scale retailers (halwais, etc.) is too onerous.
It's too expensive to create a digital database system and integrate it with government systems for small stakeholders like retailers, etc. This demand is not logical considering the cost involved and cyber-security issues.
Suggestion:
The government may create a centralized system and an app can be created for all the registered entities under the Sugar Control Order. Registered and authorised stakeholders can be asked to upload the information via App which is created by the department. This will reduce the burden of multiple software integration with a centralized system and will reduce problems for everyone.
13. Certificate regarding samples drawn etc.
A certificate to the effect that each of the samples drawn is representative of the lot from which it was drawn shall be furnished along with the particulars of the samples in the form set out in the schedule hereto annexed to the person drawing such samples by the producer or recognized dealer, as the case may be, or his representative and such certificate shall be countersigned by the person drawing the sample and an endorsement to the effect that the procedure prescribed under clause 12 has been followed, shall be made there under by the person drawing the samples and such endorsement shall be countersigned by the producer or recognized dealer, as the case may be or his representative.
Concern:
Sampling is a major area of concern and corruption. Inspectors use their sampling power as a threat. The chances of manipulation of samples are very very high and very easy to do it. This will unnecessarily harass the people in the trade. The outcome is the perpetual growth of corruption.
Either Clause 12 and 13 of the earlier Sugar Control Order of 1966 must be retained or the order must follow the FSSAI sampling and testing methods which are mandatory under the law.
In fact, sample traceability should be ensured digitally and accountability of the field officers in taking samples must be fixed and their activity must be digitally recorded to minimize harassment and manipulation. In fact, a portion of representative samples must be provided to the producer or dealer as well. FSSAI rules for sampling can be adopted so that samples can be given to the producer or dealer as the case may be. This is in the interest of natural justice and transparency.
Summary:
The department must remove the standards from the order but just fine FSSAI or BIS standards.
Reduce all clauses which add to transaction costs, which will cause non-compliance and harassment in remote areas for MSMEs.
Reduce all vagueness from the drafting of the order, wherever required add illustrations for clarity.
This Order should not stifle the innovations and ease of doing business.
Please call the stakeholders meeting to clarify all points and modify if required, before finalisation.
In case the department needs any technical or legal assistance, the same can be extended by the undersigned.
with best regards,
Vijay Sardana
CC:
PM Office, New Delhi
Office of Minister for Civil Supplies and Consumers Affairs, GOI
Office of Minister for MSME, GOI
Office of the Chief Ministers of All the States
Office of the Food Ministers of All the States
Office of the MSME Ministers of All the States
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