Initiating the long-awaited reform, the Government on Thursday lifted controls on the sugar sector partially by doing away with the levy system and regulated release mechanism.
The move will help the industry save about Rs 2,650 crore annually, while doubling the Government’s subsidy burden to Rs 5,300 crore. Scrapping of the release mechanism will help millers with better cash flows.
The present system of sugar supply to poor families through the public distribution system will continue. The removal of levy system will come into effect in the current sugar year ending September, said Union Minister of State for Food and Consumer Affairs K.V. Thomas. Sugar millers were obliged to sell 10 per cent of their output at a lower price of Rs 19.04 a kg to the Government for sales through ration shops under the levy system.
“States are free to purchase sugar through a transparent system and supply the same at Rs 13.50 a kg to the poor families,” Thomas said. The Government has provisionally capped the ex-factory price at Rs 32 a kg for calculating the subsidy for a period of two years. The difference in the ex-factory price and the levy sale price would be reimbursed to the States. Sugar production this season is estimated at over 24.5 million tonnes, while the domestic demand is projected at 22 million tonnes.
The Government’s move is largely in line with the Rangarajan Committee recommendations that suggested full de-control of the sector. However, issues such as the rationalisation of sugarcane pricing, abolition of cane area regulation and bonding, and doing away with the minimum distance criteria for setting up mills will now have to be dealt with by the States.
Other controls such as the restriction on by-products molasses and ethanol and dispensing with the compulsory jute packing will have to be examined by the respective nodal Ministries, Thomas said. While welcoming the Government’s move, M. Srinivaasan, President, Indian Sugar Mills Association, said the confusion over the two-year limit was a concern.