NEW DELHI: In a big relief to the sugar industry, the Centre, for the first time, has relaxed its penal norm of automatically converting unsold sugar into levy sugar in the given period of release from December to March. 

This will ease the pressure on mills to sell their sugar quota within the given timeframe, checking the crash in sugar prices. "It's good for the industry. There will be no distress sale to exhaust the quota even at lower prices to escape the penalty. Mills will now be allowed to sell the unsold sugar in the next release period as well," said Abinash Varma, director general, Indian Sugar Mills Association (ISMA). 

The government earlier used to penalise sugar mills for not selling their quota of sugar within the period by converting the remaining sugar into levy sugar over and above the mandatory 10% of their total production. 

The mills have to sell levy sugar to government at rates almost half the market price. The government has also reduced the quantity of sugar released in the December-March quota from 68 lakh tonne to 66.5 lakh tonne, checking the abundant supply of sugar in the market. 

"Due to oversupply of sugar amid normal demand, prices can crash. The government has done the right thing to pull back 1.5 lakh tonne sugar from the market. Mills will now be free to sell as per their cash flow requirements, market conditions and commercial considerations," said a sugar mill owner.