Some have expressed concern about the fact that the big private sector players in sugar, like the Birla Group and Dalmia Group, stayed away from the final bids after expressing interest initially. That does not mean much. Often, energetic new groups can turn around businesses that established groups may view as unviable. In any case, for the government, the priority was to get rid of an unnecessary burden. That said, there is much for the government to do to reform the sugar sector.
One of the reasons why even private mills often find the business unviable is that the state government has a right to fix a state advised price (SAP) for procurement that is higher than the fair remunerative price (FRP) for procurement determined by the Centre. Given the political economy of the state (and indeed other sugar growing states), the SAP is often set unreasonably high, and the burden falls on the mill owners. Mill owners would in normal course try and pass most of this additional burden on to the final consumers of sugar. This distortionary practice rewards a small group of farmers while penalising consumers who include a large number of poor people. The next step in sugar reform would, therefore, logically be to stop distorting prices through SAP.