In today's Opinion piece, in the Indian Express, we discuss how enacting hasty new legislation in response to public events may not be the answer. The recent spot fixing controversy in the Indian Premier League has brought the issue of betting in sports back into the limelight. As a result, public debate around betting, and steps that need to be taken to prevent the recurrence of such events, is gaining traction. The government's response to this incident has been somewhat predictable. The minister of state for sports has reportedly stated that his ministry is committed to putting in place new legislation to deal with the menace of fixing in sports. This approach to law making points towards a growing trend of initiating policy and legislative decisions as a reaction to public events. This is not something new. The Mumbai terror attack in 2008 was the catalyst for the enactment of the National Investigation Agency Act, and the brutal rape and murder of a young girl in Delhi led to the overhaul of India's penal code to ensure stricter penalties for crimes against women. Both these bills were passed without effective scrutiny, as they were not referred to a parliamentary standing committee for examination. Events in the country may, on occasion, highlight gaps in our policy and legislative framework. However, they often point out the ineffectiveness of existing laws and the lack of proper implementation. And that is not always a result of not having enough laws in the country. There are more than a 1,000 Central laws and over 15,000 state laws. The problem lies with our law-making process, which is ad hoc in nature. It is geared towards churning out legislation that is not entirely evidence based and does not take the feedback of different stakeholders into account. In its reports, the National Commission to review the working of the Constitution had observed that "our legislative enactments betray clear marks of hasty drafting and absence of Parliament scrutiny from the point of view of both the implementers and the affected persons and groups". Take, for example, the Gram Nyayalaya Act, which establishes village courts to provide people with easy access to justice and reduce the case law burden on the court system. Structured feedback from villagers, whom this act is trying to empower, prior to introducing the bill in Parliament would have given valuable insights about implementation challenges. A comprehensive study to examine the impact that village courts would have in reducing pendency in the judicial system would have provided hard numbers to substantiate what types of cases should be adjudicated by the village courts. A detailed financial analysis of the cost implications for the Central and the state governments for implementing the law would have helped policymakers decide on the scale and effectiveness of implementation. In the absence of these studies, there is no way to measure whether the law has been effective in giving villagers easy access to justice and in reducing the burden on the judicial system. The importance of stakeholder consultation was recently stressed by the parliamentary committee examining the land acquisition bill. In its report on the bill, the committee recommended that, "before bringing in any bill in future, the government should ensure wider, effective and timely consultations with all relevant and stakeholders so that all related issues are addressed adequately." Rajya Sabha MP N.K. Singh, while testifying before the parliamentary standing committee on the National Food Security Bill, had drawn the attention of the committee towards the need for an accurate financial memorandum accompanying the bill, to "avoid serious consequences in the implementation of the bill." The National Advisory Council has also suggested a process of pre-legislative scrutiny of bills and delegated legislation. In its approach paper, the Financial Sector Legislative Reforms Commission had suggested that delegated legislation should also be published in draft form to elicit feedback and that a cost benefit analysis of the delegated legislation should be appended to the draft. New laws can have a significant impact on the lives of people, so it is important that our law-makers enact "effective laws". For this to happen our law-making process needs to evolve. While there will always be public pressure for new laws, the solution lies in ensuring that the law-making process is robust, consultative and deliberative. The solution to addressing policy opportunities does not always lie in making new laws but in ensuring that whatever law is enacted is well thought out and designed to be effective.
There have been some recent developments in the sugar sector, which pertain to the pricing of sugarcane and deregulation of the sector. On January 31, the Cabinet approved the fair and remunerative price (FRP) of sugarcane for the 2013-14 season at Rs 210 per quintal, a 23.5% increase from last year’s FRP of Rs 170 per quintal. The FRP of sugarcane is the minimum price set by the centre and is payable by mills to sugarcane farmers throughout the country. However, states can also set a State Advised Price (SAP) that mills would have to pay farmers instead of the FRP. In addition, a recent news report mentioned that the food ministry has decided to seek Cabinet approval to lift controls on sugar, particularly relating to levy sugar and the regulated release of non-levy sugar. The Rangarajan Committee report, published in October 2012, highlighted challenges in the pricing policy for sugarcane. The Committee recommended deregulating the sugar sector with respect to pricing and levy sugar. In this blog, we discuss the current regulations related to the sugar sector and key recommendations for deregulation suggested by the Rangarajan Committee. Current regulations in the sugar sector A major step to liberate the sugar sector from controls was taken in 1998 when the licensing requirement for new sugar mills was abolished. Delicensing caused the sugar sector to grow at almost 7% annually during 1998-99 and 2011-12 compared to 3.3% annually during 1990-91 and 1997-98. Although delicensing removed some regulations in the sector, others still persist. For instance, every designated mill is obligated to purchase sugarcane from farmers within a specified cane reservation area, and conversely, farmers are bound to sell to the mill. Also, the central government has prescribed a minimum radial distance of 15 km between any two sugar mills. However, the Committee found that existing regulations were stunting the growth of the industry and recommended that the sector be deregulated. It was of the opinion that deregulation would enable the industry to leverage the expanding opportunities created by the rising demand of sugar and sugarcane as a source of renewable energy. Rangarajan Committee’s recommendations on deregulation of the sugar sector Price of sugarcane: The central government fixes a minimum price, the FRP that is paid by mills to farmers. States can also intervene in sugarcane pricing with an SAP to strengthen farmer’s interests. States such as Uttar Pradesh and Tamil Nadu have set SAPs for the past few years, which have been higher than FRPs. The Committee recommended that states should not declare an SAP because it imposes an additional cost on mills. Farmers should be paid a uniform FRP. It suggested determining cane prices according to scientifically sound and economically fair principles. The Committee also felt that high SAPs, combined with other controls in the sector, would deter private investment in the sugar industry. Levy sugar: Every sugar mill mandatorily surrenders 10% of its production to the central government at a price lower than the market price – this is known as levy sugar. This enables the central government to get access to low cost sugar stocks for distribution through the Public Distribution System (PDS). At present prices, the centre saves about Rs 3,000 crore on account of this policy, the burden of which is borne by the sugar sector. The Committee recommended doing away with levy sugar. States wanting to provide sugar under PDS would have to procure it directly from the market. Regulated release of non-levy sugar: The central government allows the release of non-levy sugar into the market on a periodic basis. Currently, release orders are given on a quarterly basis. Thus, sugar produced over the four-to-six month sugar season is sold throughout the year by distributing the release of stock evenly across the year. The regulated release of sugar imposes costs directly on mills (and hence indirectly on farmers). Mills can neither take advantage of high prices to sell the maximum possible stock, nor dispose of their stock to raise cash for meeting various obligations. This adversely impacts the ability of mills to pay sugarcane farmers in time. The Committee recommended removing the regulations on release of non-levy sugar to address these problems. Trade policy: The government has set controls on both export and import of sugar that fluctuate depending on the domestic availability, demand and price of sugarcane. As a result, India’s trade in the world trade of sugar is small. Even though India contributes 17% to global sugar production (second largest producer in the world), its share in exports is only 4%. This has been at the cost of considerable instability for the sugar cane industry and its production. The committee recommended removing existing restrictions on trade in sugar and converting them into tariffs. For more details on the committee’s recommendations on deregulating the sugar sector, see here.
