Govt allows sugar sector to be partially decontrolled

New Delhi: The government today gave sugar mills freedom to sell in the open market and unshackled them from the obligation of supplying the sweetener at subsidised rates for ration shop - a decision that will help the industry save about Rs 3,000 crore annually.

The government maintained that the decision will not lead to any rise in retail prices of sugar. However, it would double the government’s subsidy burden to Rs 5,300 crore annually from about Rs 2,600 crore.

The decision to partially decontrol sugar sector, the only industry left under the government control, was taken by the Cabinet Committee on Economic Affairs (CCEA).

“The regulated release mechanism may be dispensed with immediately. Obligation of levy on sugar mills be done away with for sugar produced after September 2012,” Food Minister K V Thomas told reporters after the meeting.

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Under the regulated release mechanism, the Centre fixes the sugar quota that can be sold in open market. Of late, this mechanism has been relaxed and the quota is now being released on half-yearly basis from the earlier monthly-wise.

In levy sugar system, millers are required to contribute 10 percent of their output to the Centre for running ration shops at cheaper rate, costing industry Rs 3,000 crore a year.

Thomas further said the requirement of sugar for ration shops may be procured by states through open market through transparent system.

“The Government of India will bear the difference between the ex-mill price of Rs 32 per kg and retail sugar price of PDS at Rs 13.50 per kg,” Thomas added.

The government will continue to fix fair and remunerative price of sugarcane. The minimum distance criteria between two mills will also continue, among other controls.

The CCEA decision to remove two major controls on the sugar sector was based on the recommendation of the Rangarajan committee report submitted in October last year.

Assuring that the government will continue to supply sugar via ration shops at cheaper rate, Thomas said: “As per the Rangarajan Committee recommendation, levy sugar has to be taken out of the system, we had a discussion. What we have decided is that the present public distribution system (PDS) system will continue at the same rate, same quantity.”

“The states will be mandated to sell sugar at current retail issue price (RIP) of Rs 13.50 per kg. The state will be given the subsidy for the balance amount between RIP and the current ex-mill price calculated provisionally at Rs 32 per kg,” he said.

The ex-mill price will be capped at Rs 32 for 2012-13 and 2013-14 marketing years (September-October), he added.

The government supplies about 17-20 lakh tonnes annually through ration shops at subsidised price bearing a subsidy of about Rs 2,600 crore annually, which is over and above the Rs 3,000 crore borne by the industry.

“At present, subsidy is Rs 2,600 crore. By removal of levy sugar obligation, it will go up to Rs 5,300 crore,” he said.

Thomas said the recommendations of the Rangarajan Committee relating to cane area reservation, minimum distance criteria and adoption of the cane price formula be left to state governments for adoption and implementation as considered appropriate by them.

PTI