Cabinet may again discuss hiking ration sugar price

With the major Hindu festivals coming to an end this year, the Cabinet is once again expected to consider a proposal to increase the price of sugar sold through ration shops at a meeting slated for this week.

Those in know of the development said the current export scenario of wheat and non-basmati rice and also a food department proposal to export another 1.5 million tonnes of wheat from the central pool over the already approved 2 million tonnes could also come up for discussion in the Cabinet.

A similar proposal to raise the retail price of sugar was deferred in September because of absence of food and consumer affairs minister KV Thomas.

The proposal also did not find favour of a section of the Congress along with its President Sonia Gandhi, who was reportedly unhappy over the timing given that the festival season was approaching fast. Consumption of sugar goes up in the festival season.

In 2010, too, a suggestion to raise to retail price of sugar fell through because of its impact on the poor.

However, officials said this time around, the finance ministry is keen on bringing about the proposal which would enable the government to bring down its annual food subsidy, expected to go beyond estimated Rs 75,000 crore for 2012-2013 financial year.

Officials said out of the total food subsidy, the subsidy on selling cheap sugar through ration shops would come down to nil if the retail price is raised to Rs 25.37 per kg from the current Rs 13.50 per kilogram.

For sugar sold at every rupee lower than this level for supply under the PDS, the government will have to incur a subsidy of Rs 270 crore a year, the officials said. The PDS price of sugar has been constant at Rs 13.50 since March, 2002.

The subsidy burden has risen sharply in the last few years because the price at which government purchases sugar from mills for distribution through the public distribution system (known as ex-factory levy sugar price) has increased by more than 40% since 2008-09 crop marketing season.

Mills are mandated to sell 10% of their annual production to the government for PDS at Rs 19.05 per kilogram which is far less than the prevailing market price. This price is also due for revision since sugarcane price has been raised by over 17% for the new season beginning October.

Sugar season runs from October to September. The subsidy is expected to increase further if the ex-factory levy sugar price is revised because of rise in sugarcane price. It sells over 200,000 tonnes of sugar every month through the public distribution system.

Meanwhile, on wheat, officials said another allotment of 1.5 million tonnes is being considered for export as international markets have turned favourable.