Centre mulls freedom for states to fix PDS sugar rate

About 2.8 mn tonnes of sugar is required for PDS

Amid demands from various states, the food ministry is mulling giving flexibility to state governments to fix the PDS rate of sugar, which has been kept unchanged at Rs 13.50 per kg since 2002.

After decontrol of the sugar sector in April 2013, state governments have been asked to buy sugar from the open market to meet the demand under the public distribution system (PDS). The Centre has been subsidising such state purchases up to Rs 32 per kg. The subsidy is due for review in October.

“There are demands from various states like Gujarat and Kerala that the state governments be given the flexibility to fix the PDS rate of sugar. The food ministry is considering their demand seriously,” sources said.

Some of them have also suggested that the Centre should keep the subsidy for state purchases fixed at Rs 18.50 per kg and allow them to fix the PDS rate either lower or higher than the existing rate and bear the cost burden accordingly, the sources added.

About 2.8 million tonnes of sugar is required for PDS. At present, sugar is sold at the retail issue price (RIP) of Rs 13.50 per kg in ration shops.

The difference between RIP and the ex-mill price of Rs 32 per kg, which is capped for two years till September 2014, is being given as subsidy to states.

Even as sugar prices have gone up over the years and is presently ruling in the range of Rs 34-40 per kg in the retail markets, the government has not hiked the PDS rate of sugar from 2002. Prior to decontrol of the sector, it was mandatory on the part of millers to supply 10 per cent of their total production to the government at a rate lower than the retail markets.