Quantity of the commodity sold through ration shops has remained constant since 2002.
The food ministry is working on a proposal to increase the retail price of sugar sold through ration shops to lower the subsidy burden on the government exchequer.
In the last few years, the price at which the government bought sugar from the mills for distribution through the public distribution system (known as the ex-factory levy sugar price) has been raised by 40 per cent since 2008-09 crop marketing season. However, the rate at which it is sold has been kept constant — at Rs 13.50 per kg since March 2002. Sugar season runs from October to September.
Between 2009-10 and 2010-2011, the ex-factory levy sugar price was raised by 5.05 per cent from Rs 17.61 per kg to Rs 18.50 per kg. The difference between the purchase and sale price of Rs 5 on every kilogram of sugar sold is putting a pressure on the exchequer, officials said.
| BITTER TASTE The subsidy burden on every kilogram of sugar sold through PDS | |||
| Year | Purchase price* | Sale price** | Subsidy |
| 2008-09 | 13.22 | 13.50 | - |
| 2009-10 | 17.61 | 13.50 | 4.11 |
| 2010-11 | 18.50 | 13.50 | 5.00 |
| *Also known as the ex-factory levy sugar price ** Also called as the retail issue price NOTE: From 2003-04 to 2008-09, the purchase price of sugar for PDS was kept unchanged at Rs 13.22 per kg. The sugar crop season runs from October to September SOURCE: Department of Food and Public Distribution | |||
The government supplies 2.16-2.6 lakh tonnes of sugar every month for sale through the PDS. To meet this obligation, sugar mills are mandated to sell 10 per cent of their production every month at a rate which is far less than the prevailing market price.
The amount mandate was raised to 20 per cent in 2009-10 as more sugar was required for supply through the PDS because of fall in production.
According to officials, since sugar production has stabilised, there is a need to raise the retail price of sugar sold through ration shops or else the state civil supplies corporations and other agencies, which buys the sweetener for PDS, will run out of liquidity forcing them to curtail their sugar off take from mills.
“State civil supplies corporation and other government bodies could face a liquidity crunch as the difference between the ex-factory levy sugar price and the rate at which it is sold through ration shops has widened in the last few years,” officials said.
If agencies, which buys sugar for PDS, cut down their off take, it will lead to build-up of levy sugar stock in mills, locking up their liquidity and could also harm their ability to pay sugarcane price to farmers.
“Hence, it is of utmost importance that the retail price of sugar sold through ration shops should be brought in line with the all India average levy sugar procurement price,” the official said.
The ministry had earlier, too, raised this issue with the empowered group of ministers in June 2010 and, thereafter, in September 2010 and also in December the same year.
However, any decision to increase the price of sugar sold through ration shops was deferred due to high food inflation.
India’s sugar production in 2010-2011 crop year that will end in September is estimated at 24.2 million, up more than 25 per cent from last year.
