Govt softens stand on levy sugar carryover

The government has softened its stand on the carry-over period of levy sugar that is not lifted. It told the Patna High Court that a minimum carry-over of six months is required at the start of every new sugar season to meet levy sugar demand. At present, the government can carry forward unlifted levy sugar for a maximum period of two years.

Levy sugar is the portion of total sugar production that mills are required to sell the government at a fixed price every year for the public distribution system (PDS). At present, sugar mills have to sell 10 per cent of their produce at Rs 1,900 per quintal under the levy obligation. This is compared to the open market price of Rs 3,200 per quintal.

The food ministry told the court in a supplementary affidavit filed recently: “A minimum of six months’ time from the close of a sugar season is required to safely meet the requirements before the data about the sugar production of the succeeding year is formally available.” The court is scheduled to hear the case on July 27.

The food ministry received a setback earlier this year after the Patna High Court order directed the government to use all unlifted levy sugar obligation by mid-April and held that levy sugar of one season should not be carried to the next. The government, however, could not lift the carry-over sugar that stood at two million tonnes (mt). At 10 per cent of produce, another 2.6 mt levy sugar is available during the current sugar season (October-September).

The food ministry, through the Directorate of Sugar, filed a review petition at the division bench of the court. However, no stay was granted on the January order. Consequently, several companies declined to offer the government levy sugar from the previous sugar season that ended in September 2011.

Upset with the fallout, the directorate warned such companies of the ill-effects. In a letter to Vishnu Sugar in June, the food ministry said not delivering levy sugar following the court order amounts to “indulging in guerrilla warfare tactics and is not in the interests of the industry as well as the PDS system in the country and not in the interests of maintaining a healthy relationship between the industry and the government of India”.

While mills are required to sell 10 per cent as levy every year, study of past data shows the government had failed to lift even half of its levy entitlement.