State to procure sugar for poor through live auction

The government will buy sugar through a live bid on the National Commodities and Derivates Exchange, an exchange for commodities, to provide it to the poor under the National Food Security Act

Setting aside the fears arising from the recent Rs 5,000-crore scam at the National Spot Exchange Limited (NSEL), a commodities exchange, the Maharashtra government will dabble in some spot trading of its own on another commodities bourse this week, by conducting a live electronic auction to procure sugar from big national mills.

CM Prithviraj Chavan has given the go-ahead for the purchase of sugar through a live auction in a bid to bring in more transparency and to control increasing sugar prices. File pic
CM Prithviraj Chavan has given the go-ahead for the purchase of sugar through a live auction in a bid to bring in more transparency and to control increasing sugar prices. File pic

The state has signed an MoU with the National Commodities and Derivatives Exchange (NCDEX) to procure sugar from electronic auction. Chief Minister Prithviraj Chavan gave his nod to this first-of-its-kind auction to be held this week, after meeting with the officials of the Forward Markets Commission (FMC), which governs the commodities market.

Officials said that while the scam-tainted NSEL was promoted by Jignesh Shah-led Financial Technologies, a private body, FMC a government regulatory body oversees NCDEX, thus making it safer.

So far, 55 sugar firms from across the country have applied to supply 1,40,000 quintals of sugar to the state, which will then be supplied every month to lakhs of Below Poverty Line (BPL) cardholders and beneficiaries of the Antyodaya scheme, which aims to allocate food grains to 1 crore of the poorest of the poor families.

Each poor family gets 500 grams per member; this goes up to 600 grams in the four months of festivities beginning August 1. Maharashtra distributes 3.75 lakh tonnes of grains every month under the National Food Security Act, 2013, to nearly 7 crore beneficiaries.

Radical move
This is the first time Maharashtra is taking its commodity auction to the futures market with a bid to ring in transparency and, at the same time, control sugar prices currently hovering at a higher range of Rs 31 to Rs 35 per kg. The auction was necessitated after talks with Sakhar Mahasangh fell through last week on the issue of fixing a suitable price for the commodity.

Last week, Union Minister Ram Vilas Paswan held a meeting with the officials of Maharashtra and Uttar Pradesh and revived sops for the sugar industry in the wake of rising inflation and prices of sugar. The NCDEX auction in Maharashtra will be held for 17 districts first; the next batch of 17 districts shall be taken care of in the next week.

The sugar firms have already been registered on the NCDEX, and state officials will monitor bidding on NCDEX’s server. Even the payment will be made through NCDEX once the delivery is made at the district and panchayat level.

The system has already been tried in Gujarat and Karnataka, and could herald a radical change in the way Maharashtra procures and distributes its welfare goods, said officials.

In the earlier system, the central government would fix a price and the state would call for tenders. After negotiations with the supplier, sugar would be purchased. Maharashtra had halted its old and earlier levy on sugar purchases in the state from May 2013.

Rs 31-Rs 35
Price per kilogram of sugar currently

“This will not only bring prices also under control, but also give better and faster access to sugar for the poor who were deprived of it due to the earlier old system,” said Deepak Kapoor, secretary, food and civil supplies.

National Commodities and Derivatives Exchange is a national-level, technology-driven multi-commodities exchange founded in 2003. It offers trading in 31 agricultural and non-agricultural commodities which include precious metals, a polymer and two other metals. It has offices in Mumbai, Delhi, Ahmedabad, Indore, Hyderabad, Jaipur, and Kolkata.

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