The agriculture ministry has favoured the proposal to raise excise duty on sugar to lighten the subsidy burden on the Centre if it decides to partially shed control over the sector and buy the sweetener from the open market for its welfare programmes.

“The food ministry has moved a Cabinet proposal on the removal of levy sugar and continued supply of subsided sugar under the public distribution system (PDS)... Once the levy system is removed, the government has to buy it at the open market price,” agriculture minister Sharad Pawar said on Monday. Currently, the government buys sugar at R19.50 per kg from millers and sells it at R13.50 per kg under PDS.

“To reduce the financial burden and continue supply of subsidised sugar, the food ministry has proposed an increase in the excise duty... We have supported the proposal,” he said.

In October last year, an expert panel chaired by Prime Minister's Economic Advisory Council chairman C Rangarajan had recommended freedom to mills from supplying subsidised sugar for state-run welfare programmes as well as to sell sugar in the open market, among others.

If implemented, the scrapping of the levy burden alone would leave an additional R3,000 crore a year with the cash-starved sector, but it will also raise the Centre’s food subsidy burden accordingly. At present, mills are mandated to sell 10% of their output to the government for the public distribution system at cheaper rates that cover just around 70% of their cost of production, which is known as the levy burden. Last week, food minister KV Thomas said the government would take a decision on sugar sector decontrol in 15 days.

At present, the excise duty on sugar is about 70 paise per kg, and the Centre requires around 2.7 million tonne of sugar a year for its welfare programmes.

‘GM crop field trial should continue’

On genetically-modified crops, food minister Pawar said: “Constrained by limited availability of natural resources including land, we do not have any option but try to achieve major breakthrough in productivity to ensure food security of the country’s 1.2 billion plus population...We cannot afford to curtail the vigour of our scientific community and deny them the right to conduct field trial (trial of) GM crops... The process of research should not be stopped and it should not be jeopardised,” he said.

The minister said he has written to chief ministers of all the states on this issue and also offered to send a team of scientists for further deliberation. While some states have responded positively to his suggestion, others, including Bihar, have opposed it.

At present, the government has allowed commercial cultivation of Bt cotton, while it imposed a moratorium on Bt brinjal in the year 2010 due to concerns expressed by environmental activists.

Last year, a Parliamentary panel had suggested banning all field trial of GM crops.

Sugar futures rose on Monday responding to news that the government may initiate the process to deregulate the sugar sector, although the spot market continued to remain subdued in the absence of any immediate trigger.

The benchmark March sugar contract on National Commodity and Derivatives Exchange ended up 1.3% at R3,171 a quintal from the previous close.