Sikkim bites the sugar bullet

The state government decides to charge double the central rate for PDS sugar

In a first, the Sikkim government has gone ahead with an increase in the price of levy sugar, meant for the Public Distribution System (PDS), even as the Centre continues to mull such a measure.

Levy sugar is fixed by the Centre as a percentage of a mill’s supply. The Centre also fixes the price. However, the central responsibility ends with making sugar available to states at the levy price for distribution under PDS from the mills. From the mills, starting with the transportation, it is for states to fix the pricing and distribution.

According to central government officials, Sikkim has raised the price of levy sugar to Rs 26 a kg as against the central government rate of Rs 13.50. This could set a precedent for others on partial deregulation of levy sugar pricing. The state procures from mills in Uttar Pradesh and transports it by trucks, as there is no rail link.

FIRST AGAINST THE TIDE

• Rs 26/kg Price of levy sugar in Sikkim
   
• Rs 13.50/kg Price of levy sugar fixed by the Centre
   
• Rs 30/kg The market price of sugar
   
• 60-70% Lifting of sugar under PDS from mills
   
• 90-95% Sugar lifted from mills under PDS earlier

              

Data compiled by BS Research Bureau
Source: Sugar Merchants' Association of Navi Mumbai

The Union ministry of food had moved a proposal for the Cabinet to raise the price of levy sugar from Rs 13.50 a kg, fixed since 2002, to Rs 24-26 a kg but a decision has been deferred more than once. The market price is Rs 30 a kg. To cut the subsidy under PDS for sugar to the states, the central government had asked states to raise the price of sugar for the PDS without waiting for its own decision. Only Sikkim has done so.

Earlier, there was not much difference between the market price and levy sugar meant for the PDS but the difference has been rising over recent years. Since the states are reimbursed to the extent of Rs 13.50 per kg and the market price was around it, supply was not a problem for the PDS. The situation has since reversed and the lifting of sugar under the PDS from mills has come down to 60-70 per cent of the stock as against 90-95 per cent earlier, said officials.

The subsidy is given to states against receipts of distribution of sugar under PDS at the levy price of Rs 13.50 per kg only. For instance, say sources, the Bihar and Chhattisgarh governments have almost stopped lifting sugar from mills for the PDS.