In a meeting chaired by Prime Minister Manmohan Singh, the government also decided to scrap the minimum export price of onion, a step that will fetch more income to growers.
"Sugar exports are freed and it is brought under open general license (OGL) scheme. There will be no quantitative restriction and we will stop exports when it touches a particular level," a high-level source said.
The Food Ministry has been following a policy of allotting export quota to mills on average output in the last 3 years. The Centre has allowed 2 million tonnes of exports this year.
The meeting follows Agriculture Minister Sharad Pawar's letter to Singh raising objections to the government policies on farm commodities such as sugar, cotton and milk products.
Coming under pressure from Pawar and Congress party, the government earlier this week had allowed cotton exports without any quantitative cap and lifted ban on casein exports.
Besides Pawar, Finance Minister Pranab Mukherjee, Food Minister K V Thomas, Commerce Minister Anand Sharma, PMEAC Chairman C Rangarajan and Planning Commission Deputy Chairman Montek Singh Ahluwalia attended today's meeting.
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Apprehending that storage crunch would damage foodgrain during monsoon season, it was also decided to set up a panel, headed by Rangarajan, to recommend ways to handle surplus foodgrains stock lying in the central pool.
The committee, comprising officials from Agriculture, Commerce, Food and Finance Ministries, has been asked to submit its recommendation in a shortest span as possible.
The country is estimated to have produced a record 103.41 million tonnes of rice and 90.23 million tonnes of wheat in the 2011-12 crop year (July-June). MORE PTI LUX MJH NS