The Central Government should either continue with the levy obligation for sugar mills or guarantee it will subsidise the price difference between open market price of sugar and the subsidised price at which it is sold over the Public Distribution System, according to the Tamil Nadu Chief Minister, J. Jayalalithaa.
In a letter to the Prime Minister, Manmohan Singh, she protested the Centre doing away with the levy obligation for sugar mills, which entailed them to supply 10 per cent of their production to the PDS at less than market price, and the system of regulated release of sugar into the market to keep a check on prices. She said this will affect sale of sugar to the poor over the PDS
Jayalalithaa said the decontrol will expose the commodity to volatility in the open market and add to the subsidy burden of the State Government.
The Government of India provides only one-third, 10,835 tonnes per month, of the State’s requirement of sugar for the PDS.
Under the new dispensation, the Centre will provide a subsidy of Rs 18.50 per kg only for the quantity committed under levy, but to be procured in the open market, with a rider to retain the retail price of Rs 13.50 per kg at Fair Price Shop levels. This subsidy will be available only for 2013-2014 and 2014-2015 and it is not clear if the subsidy will continue after these two years. The Centre has to commit itself to continuing this support, she said.
Also, if sugar price increases to more than Rs 32 per kg in the open market it will have to be borne by the State Government. Apart from the uncertainty in adequate supply of sugar through the PDS at affordable cost to the poor, the State will have to procure the entire stock from the open market.