Govt may pay sugar mills more to offset rise in cane price

The government is likely to pay sugar mills Rs four per kg more for the sweetener it procures for distribution through ration shops, to offset the rise in prices of sugarcane over the last few years.

However, there is no immediate plan to increase the Rs 13.50 per kg rate that ration card holders pay for sugar.

"The levy sugar (meant for distribution through ration shops) price at which we buy sugar from the mills is soon going to be revised upwards by an average Rs four a kg for 2009-10 season," a senior government official said.

At present, the government pays an average Rs 13.22 a kg to mills for procuring sugar to run its Public Distribution System. Levy prices, which vary for different zones in the country, has not been revised upwards since 2003-04 sugar season that runs from October to September.

The official said the provisional levy price for 2009-10 would take into account the Fair and Remunerative Price (FRP) of sugarcane, which is Rs 129.76 per quintal, announced by the Centre for 2009-10 season.

Besides, the government would announce the final levy prices for 2004-05, 2005-06 and 2006-07 seasons on the basis of Statutory Minimum Price (SMP) of sugarcane, he added.

The need for revision of levy price is being felt because of the substantial rise in sugarcane cost since 2003-04 when SMP was Rs 73 a quintal.

Levy sugar price has become a contentious issue after mills challenging the decision in court almost every year. The government announces a provisional levy sugar price every season so that mills are paid in time.