The government has decided to loosen its decades-old control over the sugar sector, offering a lifeline to the Rs 80,000-crore industry. The Cabinet Committee on Economic Affairs (CCEA) approved a food ministry proposal seeking freedom to mills from supplying subsidised sugar for state-run welfare programmes - known as levy sugar - and scrapping the release order mechanism through which the government controls sugar sales in the open market, as suggested by a panel set up by Prime Minister Manmohan Singh last year.
"There will be no levy on sugar for two years. There will be no change in the PDS price of sugar. There will be no burden on the consumer," food and consumer affairs minister KV Thomas told reporters after the CCEA meeting.
Although total deregulation is still far, Thursday's decision marks the beginning of the unshackling of the industry, which bears the last vestiges of stringent and complex government controls.
Thomas said that the government will bear the entire subsidy burden on sugar supplies through the public distribution system (PDS), but will not raise the price at which the sweetener is sold through ration shops.
He said the decision would have no bearing on retail sugar prices, adding that no hike in excise duty is approved. He added that states would have the flexibility to decide on the minimum distance norms for mills and they will be free to buy from open market for the PDS.
Information and broadcasting minister Manish Tewari said the gap between the provisional cap on Rs 32 per kg issue price of sugar under the PDS and the market price will increase the subsidy burden from around Rs 2,500 crore to Rs 5,000 crore.
Shares of sugar companies jumped by up to 7.3 per cent on the BSE, on a day when the Sensex fell to a four-month low on Thursday. Shares of Bajaj Hindusthan, Shree Renuka Sugars and Balrampur Chini Mills surged by 7.30 per cent, 7.07 per cent and 4.02 per cent respectively.
With political considerations weighing on sugarcane pricing and mills forced to supply subsidised sugar for welfare programmes, the sector has seen its fortunes wane.
"These decisions will help the industry achieve its potential growth of 20-25 per cent per annum. Removal of the burden of levy sugar will give the industry an annual savings of Rs 3,000 crore," said Abinash Verma director-general Indian Sugar Mills Association.
The government took the decision in the light of the C Rangarajan Committee report, which proposed dispensing with both the regulatory release mechanism and the levy system. Following today's decision, states will now have to procure sugar required for PDS from the open market, though they will be given fixed subsidy by the Centre based on existing allocations. (With FE inputs)
- By Express Bureau