Food ministry for cut in levy sugar quota to 15%

Levy sugar price has remained unchanged since 2003-04.

The Union food ministry is moving a proposal to cut the levy obligation (for the public distribution system) of sugar mills from 20 per cent to 15 per cent, due to the higher than estimated output in this sugar year current season (October 2009-September 2010).

This will allow sale of 950,000 tonnes more sugar in the open market and improve industry’s realisation by Rs 900 crore.

At present, the levy price is between Rs 1,275 and Rs 1,383 a quintal (100 kg) in Uttar Pradesh, the country’s second-largest producer. In Maharashtra, the largest producing state, the price is between Rs 1,318 and Rs 1,344. However, the open market realisation is Rs 2,600-2,700 a quintal. A proposal to increase levy price to Rs 1,750 a quintal is waiting government approval.

“A note is being prepared by the food ministry to bring down the levy quota from 20 to 15 per cent in view of higher domestic sugar production. The proposal will shortly move to the Cabinet,” said an informed source.

With India’s sugar production this year estimated to be 27 per cent higher at over 19 million tonnes compared to the initial projection of 15 million tonnes, the industry had been lobbying for the quota reduction.

The quota was 10 per cent of the sugar produced by a mill in the last sugar year and was raised to 20 per cent due to a projected dip in output.

At a 20 per cent quota on production of 15 million tonnes, three million tonnes would be available for the PDS. With improved output, this will go up to 3.8 million tonnes. Annual PDS demand is estimated at 2-2.5 million tonnes.

NewsWire18 adds: Levy sugar price has remained unchanged from 2003-04.

“The amendment is being made only as a measure of legal safeguard... the approved amendment does not in any way alter the present status regarding the power of state government to fix the state-advised price of sugarcane,” Ambika Soni, Minister of State for Information and Broadcasting told reporters after a Cabinet meeting.

Last year, the government had amended the Act by substituting Statutory Minimum Price with a Fair and Remunerative Price regime for sugarcane.

The Fair and Remunerative Price is the base for calculating levy price and it supersedes state announced prices.

The government has set the Fair and Remunerative Price at Rs 129.76 a quintal of sugarcane.