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The food ministry might raise the sugar subsidy for the two hill states of the north and for the northeast.
After the partial decontrol of the sector, with an end to the system of each mill having to deliver a specified quantity for supply through ration shops, these states had complained of logistical problems in lifting the required amounts themselves from the market. They’d urged the food ministry to assign this procurement to government-owned Food Corporation of India.
Mills had kept away from bidding for contracts to deliver the sugar. Himachal Pradesh, for example, invited bids to deliver sugar at 24 identified depots in the state. The mills kept away. Currently, at an average subsidy of Rs 18.50 a kg, the Centre is set to bear a subsidy burden of Rs 5,300 crore in 2013-14, a significant rise from Rs 2,600 crore a year before.
Even so, “we are considering a rise in subsidy to these states,” said K V Thomas, Union food minister on the sidelines of a recent meeting in New Delhi.
Mills say it will cost a further Rs 2.50 a kg in transport for supplying to these states. With state governments unwilling to pay for the additional cost, mills have evinced no interest in coming forward.
If the Centre does raise the subsidy, those benefiting would be Assam, Mizoram, Arunachal Pradesh, Nagaland, Manipur, Meghalaya, Tripura, Jammu & Kashmir, Lakshadweep and Andaman & Nicobar Islands.
“Sugar is currently sold at as high as Rs 45 a kg in hilly states. Considering that, a subsidy of Rs 18.50 a kg from the Centre is inadequate,” said an analyst from one of the largest commodity broking firms.
While decontrolling the sector early this year, the food ministry had asked states to lift sugar from the open market for its supply through ration shops. The ministry decided it would consider a base price of a maximum Rs 32 a kg, irrespective of the procurement price. Of which, a subsidy of a maximum of Rs 18.50 a kg would be provided by the Centre; the rest would be borne by states. The subsidy component would decline with a proportionate reduction in procurement price.
Following the Centre’s measure, many large states (and Delhi city) floated tenders and finalised initial quantities equivalent to one to two months of consumption. Others such as Rajasthan, West Bengal, Gujarat and Kerala are in various stages of the tendering process. Chhattisgarh, Goa, UP, Tamil Nadu, Punjab and Haryana have signed deals with co-operative sugar mills. Maharashtra and Karnataka have not taken a final decision.
