New Delhi: A mix of good and bad news may be headed the way of sugar consumers and producers ahead of the festive season.
The government is likely to announce that the poor will receive 2kg more sugar from the subsidized public distribution system (PDS) for the Dussehra festival towards the end of September.
To buy sugar during Diwali, which falls in October, and beyond, they may have to shell out Rs1.50 more per kg.
The government also proposes to raise the price of levy sugar—the sweetener bought from sugar mills for sale through PDS outlets. Sugar mills may have to sell more of their production as levy sugar.
An empowered group of ministers (EGOM), headed by finance minister Pranab Mukherjee and including agriculture and food minister Sharad Pawar and deputy chairman of the Planning Commission Montek Singh Ahluwalia, discussed the issues last week.
According to a note discussed at the meeting, a copy of which was reviewed by Mint, the food ministry has proposed an additional allocation of 2kg of levy sugar to households considered to be below poverty line (BPL). Households classified as living above poverty line (APL) in special states such as those in the North-East, Jammu and Kashmir, Andaman and Nicobar Islands and Lakshadweep will also be entitled to the higher allocation.
Levy sugar is sold at a discounted price, which currently is Rs13.50 a kg. Beginning October, the food ministry plans to increase the price to Rs15 per kg. India’s sugar season runs between October and September.
“The government is also planning to fix the price of levy sugar to be procured for the sugar season 2009-10 under a changed formula. This is also being considered by the EGOM,” said a government official close to the development who didn’t want to be named.
He also said the government plans to raise levy obligation of sugar companies from 10% to 20% of their total output.
According to the note, the government is looking at a figure of about Rs2,020 per quintal as the average ex-factory price.
Sugar production in India has been falling in the last two years. In the 2008-09 sugar season, it fell to 14.6 million tonnes from 22.6 million tonnes in 2007-08. The country produced a record of close to 29 million tonnes in 2006-07.
Since production fell in 2008-09, prices have been rising and the government resorted to import of both white and raw sugar.
“Enough damage has been done to sugar and that’s why production has been continuously falling. Both sugar mills and farmers producing sugar need to be incentivized (to boost output),” said S.L. Jain, former secretary general of Indian Sugar Mills Association. Bloomberg contributed to this story.