Subsidy burden on PDS sugar may go up due to price rise: Thomas

He said Centre should have instead asked states to link the price of cane with sugar realisation

The Centre's subsidy burden on PDS sugar may go up due to price increases after import duty on the sweetener was hiked, former Food Minister K V Thomas said today.

The senior Congress leader from Kerala also criticised the government's move to provide an additional Rs 4,400 crore interest-free loan to sugar mills to clear cane arrears.

He said the Centre should have instead asked states to link the price of cane with sugar realisation, as recommended by the Rangarajan Committee.

"Sugar prices are rising due to increase in import duty. If prices rise beyond Rs 32 a kilo, the Centre may have to bear more subsidy. This will be an additional burden on the government," Thomas told PTI.

In April 2013, the previous government had decontrolled the sugar sector by removing the obligation to supply the sweetener at subsidised rates to ration shops.

State governments were asked to procure sugar for the public distribution system (PDS) from the open market at not more than Rs 32 a kilo and sell it at a subsided rate of Rs 13.50 per kilo in ration shops.

The Centre agreed to bear the difference between the procurement and selling price for two years. The annual subsidy bill on PDS sugar post-decontrol was estimated at Rs 5,300 crore.

In the national capital, sugar prices today rose by up to Rs 2 per kg to Rs 33.40 in the wholesale market following the government's decision to hike import duty.

On interest-free loans, Thomas said, "Cane arrears in Uttar Pradesh is maximum. At present, UP mills are not paying even the fair and remunerative price of Rs 210 per quintal fixed by the Centre, leave aside the state advisory price of Rs 280 per quintal, even after the Centre provided Rs 6,600 crore interest-free loan last year."

"What is the guarantee that mills will pay arrears with the extra interest-free loan of up to Rs 4,400 crore?" he asked.

Yesterday, the government decided to hike import duty to 40 per cent from 15 per cent, extend sugar export subsidy of Rs 3,300 per tonne till September, make ethanol blending with petrol mandatory and provide the additional loan to mills to help clear Rs 11,000 crore of cane dues.