Expect sugar decontrol before Budget 2013: ISMA

NEW DELHI: The government seems to be inclined to follow the recommendations of the expert panel headed by Prime Minister's Economic Advisor Council Chairman C Rangarajan and is expected to decontrol sugar sector before the Union Budget, said Abinash Verma, DG, Indian Sugar Mills Association ( ISMA).

"The reform is likely to take place in 2 phases. The first phase would include decontrol of the sugar sales. We understand that the levy sugar obligation from the sugar mills and the regulated release mecahnism, both these controls, would go away," he told ET Now.

He added that the industry loses Rs 3,000 crore every year because it has to bear the burden of the government's social welfare programme.

"We are told by the government every quarter how much of sugar we can sell, which means we have no control over our cash flows," he added.

Meanwhile, Union Agriculture Minister Sharad Pawar has supported the food ministry's proposal to dismantle sugar control as recommended by the Rangarajan committee.

"We favour the food ministry's proposal to increase the excise duty on sugar to offset the financial burden on the Centre if it decides to buy the sweetener from the open market for ration shops," he said. The food ministry has sent a note to the Cabinet after an inter-ministerial consultation.

In the proposal, which is likely to be taken up in this week's Cabinet meeting, the ministry has recommended the removal of levy sugar obligation on mills from this season which began October 2012.

It has also suggested that the government offer a fixed subsidy for levy sugar while asking state governments to buy sugar from the open market. 'The financial burden on removing the levy sugar obligation will be Rs 5,676 crore. It can be recovered by increasing the excise duty by Rs 150 per quintal," the cabinet note says. At present, the excise duty on sugar is Rs 71 per quintal. The food ministry has also recommended the removal of release mechanism immediately to allow free flow of sugar in the market according to demand.