Craving for more reforms, the UPA government is expected to lift key restrictions on sugar, a move that could dismantle one of the last vestiges of the 'licence-raj' era blamed for crippling cane farmers and millers. The food ministry is likely to recommend the Cabinet to abolish a rule 

that makes it mandatory for mills to sell 10% output, termed as "levy sugar", to the government at below-market prices so that these could be supplied to the poor.

The government will now have to buy sugar at market rates from millers and increase its subsidy bill so that those below poverty line can continue getting cheap sugar. The government is also proposing an excise duty to make up for the loss.

This is in step with a key recommendation of a committee set up by the Prime Minister and led by Chakravarthi Rangarajan, the PM's economic advisory council chief.

Globally, sugar is 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. These controls are also set to be scrapped.  Millers have blamed "levy sugar" sales for hurting their profitability.

The sugar industry owes nearly R5,490 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.