Pune: Sugar cooperatives are seeking a cut in the levy sugar obligation for the public distribution system (PDS) from 10% to 4% on the grounds that the government does not require so much stock. The National Federation of Cooperative Sugar Factories (NFCSF) has made a representation to minister of state for consumer affairs and public distribution, KV Thomas, seeking this cut.

Sources in the industry say that the government is working on this and there is every likelihood of the levy sugar obligation being brought down to 5-6% soon. Industry officials pointed out that while levy sugar prices stood at R1,800 per quintal, prices in the open market were around R2,800 per quintal, a difference of R1,000 per quintal. “It was felt that the industry could get an advantage of R1,000 crore, which in turn could improve the liquidity of cooperatives as well,” officials said. The government has notified the ratio between levy sugar and non-levy sugar obligation for 2011-12 as 10:90.

“The government usually requires about 28 lakh tonne levy sugar for PDS during a year. As per the stock position posted by the Directorate of Sugar, New Delhi, on its website, carry-forward levy obligation of previous seasons has been shown at 20.78 lakh tonne. It means the government requires around 7 to 8 lakh tonne from the season 2011-12. As per industry estimates, sugar production during the season 2011-12 would be around 260 lakh tonne. It means the government requires only 2.69% to 3.08% of the total sugar production in the current year for PDS,” the representation mentioned.

NFCSF has urged the government to amend its notification for procurement of levy sugar for the 2011-12 sugar season from 10% to 3-4% so that there is no carry-over levy sugar obligation into the 2012-13 sugar season.

NFCSF MD Vinay Kumar said the government has started releasing levy sugar for PDS from 2011-12 season. However, the government has not yet notified zone-wise levy sugar prices for the season 2011-12. “Factories are already delivering levy sugar well below the cost of production, which has increased the financial burden on the factories. It is suggested that levy sugar prices should be notified well before the releasing of levy sugar order,” he said.

Ajit Chougule, acting MD, Maharashtra State Cooperative Sugar Factories Federation, said that this has been an old demand from the industry. This time, the lifting of levy sugar has been delayed. Maharashtra produced 90 lakh tonne of sugar in the last season and 10% of this came under the levy quota. This time, the process has taken longer and sugar is yet to be lifted by the Food Corporation of India (FCI) and West Bengal Food Corporation, officials said.

NFCSF also pointed out that the cost of sugarcane cultivation has increased due to higher input cost of chemical fertilizers and labour cost during 2011-12 vis-a vis last year.

The federation pointed out that sugarcane yield per hectare had also gone down due to climatic condition as alternative crops were giving better returns in comparison to sugarcane crop. Therefore, the prices which industry had paid last year were not acceptable to cane growers this year, thereby aggravating the situation.