Govt goes slow on levy sugar buy

Almost 50 per cent of the levy sugar has not being lifted by the Union government as levy sugar rates are ruling above open market prices.

The low levy sugar offtake has hit the industry hard, which is already reeling from a glut. The domestic sugar production in the current season is estimated at 28 million tonnes, up 45 per cent from 19.2 million tonnes produced in the last season.

According to sugar industry associations, the total levy sugar obligation on the industry in October-April 2006-07 sugar season (October-September) was 12.19 lakh tonnes.

However, only 6.12 lakh tonnes or just about 50 per cent was lifted by the government. Though data for the May-July period is not available, industry estimates the lifting to have fallen even further.

"The remaining quantity of levy sugar is still lying in the godowns of sugar mills and creating additional storage burden for the industry, which already has storage problems owing to a bumper production. If the government cannot handle levy sugar, it should do away with the levy obligation," said industry sources.

Under the Sugarcane Control Order, 1966, the Union government imposed 10 per cent levy obligation on the sugar industry, which will be bought by the government at a fixed price and sold under the public distribution system.

The remaining 90 per cent can be sold by the mills in the open market but here too the government allocates a monthly sale quota and no mill can sell above the quota.

Moreover, the levy sugar price has not been revised in the past three years. In October 2006, the government had asked the Tariff Commission to make a study revising the levy sugar price.

However, this was done after rejecting an earlier 377-page report prepared by the Ministry of Expenditure's Cost Audit Branch.