To meet the twin challenges of reining in surging sugar prices and ensuring cheaper supplies to the poor, the government may mull increasing the levy sugar quota of mills to 20 per cent from the existing 10 per cent, trade sources said today.
To take the sting off the proposed increase in levy sugar quota, the government may also propose raising the levy sugar sale price to Rs 18-20 a kg from the existing Rs 13, a trade official said.
“The issue is likely to be discussed at the government’s meeting with sugar industry representatives at noon,” said an industry official, who is part of the delegation scheduled to meet Agriculture Minister Sharad Pawar on Monday.
Currently, it is mandatory for each mill to sell 10 per cent of its total sugar output to fair price shops at around Rs 13 a kg. The government dictates the quantity of levy sugar to be sold by each mill on a monthly basis. It also decides the quantity of sugar mills can sell in the open market each month to regulate supplies as well as prices.
The industry official said the increase in the levy sale quota could be part of the government’s strategy to cool down sugar prices, which have risen to over Rs 32 a kg in wholesale markets, a gain of Rs 5-7 a kg since August 1, on shortage concerns, high festival demand and rising import costs.
An official with a leading sugar mill said along with increasing the levy sugar quota, the government may also consider dismantling the monthly non-levy quota mechanism.
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“Decontrol of the sector could be a possibility at this stage, as most feel it would be prudent if the government allows the market to take its own course,” the official said.
Last week, Gautam Chawla, head of sugar advisory NRG Consultants, had said the government should let prices rise to some extent and they would ease automatically once imported sugar starts landing in the country.
“I think the government should let the market take its own course...Any intervention now would only mess up things further,” he had said.