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At present, the Centre forces mills to sell sugar to it at a highly subsidised price compared with the market rate to run the public distribution system (PDS).
"Food Ministry has moved a Cabinet proposal on removal of levy sugar and continue supply of subsided sugar in PDS. Currently, government buys sugar at Rs 17 per kg from millers and sells it at Rs 13.50 per kg in PDS. Once levy system is removed, the government has to buy it at open market price.
"To reduce financial burden and continue supply of subsidies sugar, the Food Ministry has proposed increase in excise duty.... We have supported the proposal," Agriculture Minister Sharad Pawar told reporters on the sidelines of a function.
According to sources, food ministry has proposed to raise excise duty by Rs 1.50 per kg from the current 95 paise per kg. The Centre requires 27 lakh tonnes annually for PDS.
Food ministry has moved a proposal to remove two major controls on the sugar industry - regulated release mechanism and levy sugar obligation as recommended by the expert panel headed by PMEAC Chairman C Rangarajan in October last year.
Under the levy sugar system, mills are required to sell 10 per cent of their output to the Centre at cheaper rates to run ration shops, costing Rs 3,000 crore to industry annually.
The Rangarajan panel had also suggested doing away with the regulated release mechanism under which the Centre fixes the sugar quota that can be sold in the open market.
Sugar production of India, the world's second largest producer but biggest consumer, is estimated at 24.3 million tonnes in the 2012-13 marketing year (October-September) as against over 26 million tonnes in the previous year.
