NEW DELHI: Union Agriculture Minister Sharad Pawar has supported the food ministry's proposal to dismantle sugar control as recommended by an expert panel headed by Prime Minister's Economic Advisor Council Chairman C Rangarajan. Pawar said the agriculture ministry was in favour of the Rangarajan committee's recommendation.

"We favour the food ministry's proposal to increase the excise duty on sugar to offset the financial burden on the Centre if it decides to buy the sweetener from the open market for ration shops," he said. The food ministry has sent a note to the Cabinet after an inter-ministerial consultation.

In the proposal, which is likely to be taken up in this week's Cabinet meeting, the ministry has recommended the removal of levy sugar obligation on mills from this season which began October 2012.

It has also suggested that the government offer a fixed subsidy for levy sugar while asking state governments to buy sugar from the open market. 'The financial burden on removing the levy sugar obligation will be Rs 5,676 crore. It can be recovered by increasing the excise duty by Rs 150 per quintal," the cabinet note says. At present, the excise duty on sugar is Rs 71 per quintal. The food ministry has also recommended the removal of release mechanism immediately to allow free flow of sugar in the market according to demand.

Presently, mills are allocated sugar quota for four months depending on their production capacity. "If the Cabinet approves the proposal, mills will be free to sell sugar according to their commercial interest and demand in the market," said Abinash Varma, director general, Indian Sugar Mills Association, an industry body.

Stock prices of major sugar mills like Shree Renuka, Balrampur and Dhampur saw up to an 8% rise in trading on Monday. The food ministry has recommended regulation of sugar exports and imports through tariff to be decided by an inter-ministerial group from time to time.

"There should be a clear-cut policy on exports and imports so that international markets have the trust on Indian produce. Exports and imports should be regulated by levying a duty. If production is less, impose a high export duty and if production is more, levy a high import duty to regulate the movement of the commodity," said a food ministry official. The food ministry has asked states to decide on cane area reservation and packaging in jute bags, while the decision on sale of byproducts like molasses, bagasse and ethanol be taken by nodal ministries. "Currently, farmers have to essentially sell their produce to designated mills in their area.

State governments may free farmers from this obligation and also replace compulsory packaging with jute bags with high-density polyethylene bags, helping the industry to save Rs 1,000 crore annually," the official said.