Govt to incur subsidy of Rs 1,000cr on sugar sale through PDS

NEW DELHI: The government will have to incur a subsidy of about Rs 1,000 crore to supply sugar through ration shops due to an increase of about Rs 4 a kg in the price that it pays to mills for buying the sweetener.

The Food Ministry has increased the price of levy sugar (meant for ration shops) to an average of Rs 17.57 per kg for the 2009-10 crop year, which runs from October-September, against Rs 13.22 per kg for the previous year.

However, the government has kept the central issue price of levy sugar (the rate at which it sells sugar in the ration shops) unchanged since March, 2002, at Rs 13.50 a kg.

The Food Ministry needs 2.7 million tonnes of sugar every year for the public distribution system.

"Increase in price of levy sugar for 2009-10 will result in a subsidy of about Rs 1,000 crore if the issue price of sugar sold through ration shops is not increased," a senior Food Ministry official said.

Indian Sugar mills Association Deputy Director General M N Rao said the government will have to bear a subsidy of about Rs 1,200 crore because of the increase in the levy price and asked the government to raise the issue price, which has been kept unchanged for many years.

The government official said the ministry might consider placing a proposal before the Empowered Group of Ministers (EGoM) to increase the issue price of sugar.

Mills are obligated to contribute 20 per cent of their total production in 2009-10 season to the government for supply through ration shops, which is known as levy sugar.

The ministry plans to reduce the percentage of levy sugar from 20 per cent to 16 per cent, as the country's sugar output has been revised upwards to 18.8 million tonnes in the current season from the earlier estimate of nearly 16 million tonnes.

The sugar output of India, the world's second largest producer and biggest consumer, is estimated to rise to 23 million tonnes to equal annual domestic demand in the 2010-11 crop year, which starts in October.