New Delhi: Craving for more reforms, the UPA government is expected to take a series of steps to remove restrictions on sugar, a process that could dismantle one of the last vestiges of the 'licence-raj' era blamed for crippling cane farmers and millers.

The sugar industry, which is running in losses, owes nearly Rs. 5,490 crore in payment arrears to farmers, which often prompts them to shift to other crops. This leads to occasional shortfall in sugar output, pushing up consumer prices.

A committee set up by the Prime Minister has recommended abolishing a rule that makes

it mandatory for mills to sell 10% output at below-market prices for supplies to the poor through the public distribution system, C Rangarajan, the committee's chairman said on Friday.

This enables the government to save Rs. 3,000 crore, which should now be given to states so that they can continue to supply cheap sugar to the poor. Another key recommendation requires 70% of millers' revenue should go to farmers, holding that 30% is sufficiently profitable for the industry.

"We haven't interfered with the implicit subsidies, which should now be channeled to the states so that they can continue to provide sugar to the poor," Rangarajan told HT.

India is the world's largest sugar consumer and second-biggest producer after Brazil. Sugar is globally a controlled commodity, but India, the world's second-largest producer, regulates it the most. The government also fixes the amount each mill can sell in the open market every month and sets up compulsory zones from where each mill can operate. This hampers both the millers' profitability and farmers' bargaining power. The panel recommended scrapping all these archaic controls.

However, to assure that farmers get assured prices, the government would continue to decide the price of cane, through the Fair and Remunerative Price mechanism.

Attempts to decontrol sugar were first made in 1971-72 and several times later, only to be shelved. Over the years, controls were eased on major industries such as steel and cement, but not in the sugar sector. "We welcome the suggestions. We hope these steps are implemented soon," a spokesperson for the Indian Sugar Mills Association said.