In a relief to the sugar industry, the government will soon reduce the carryover period for unsold levy sugar to six months from the current 24 months. This can then be sold by mills in the open market.
Speaking at a function of the National Federation of Cooperative Sugar Factories (NFCSF), Union Food Minister K V Thomas said a notification on this would be issued soon.
Levy sugar is the portion of total sugar production which mills are required to sell to the government at a fixed price for the Public Distribution System (PDS). At present, sugar mills have to sell 10 per cent of their produce at Rs 1,900 a quintal as levy obligation. The open market price is Rs 3,200 a quintal. While mills are required to sell 10 per cent as levy every year, the data shows the government fails to lift even half this entitlement.
Vinay Kumar, managing director of NFCSF, said, “Carrying forward of previous years’ levy obligation is a financial burden for mills, as they have to supply it at the previous year’s price. The shortening of this period to six months will bring major relief to the industry. It will improve realisation and cash flows, while helping in timely payment to sugarcane farmers.”
In January this year, the Patna High Court, in a petition filed by Kolkata-based Vishnu Sugar Mills, had directed the central government to “liquidate the accumulated monthly carry forward liabilities within three months, beyond which it would not be allowed, and with the next sugar production year, commencing from October each year, there would not be any carry forward of past liability and the levy liability would start with a clean slate every year”.
The Union food ministry, through the directorate of sugar, filed a review petition to a bigger 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 which ended in September 2011.
The change in government stance on levy sugar is a fallout of this litigation. The Indian Sugar Mills Association, the apex private sugar industry body, and NFCSF had impleaded themselves in the case.