The author has posted comments on this articleTNN | Apr 5, 2013, 04.30AM IST

NEW DELHI: Now, consumers could face a greater fluctuation in sugar prices through the year with the government deciding to partially decontrol the Rs 80,000 crore sugar trade.

The cabinet committee on economic affairs (CCEA) on Thursday decided to do away with the regulated release mechanism and the obligation of levy on sugar mills, leaving the call on cane area reservation, minimum distance criteria and adoption of the cane price formula to state governments.

The regulated release mechanism gave the Centre power to fix the amount of sugar mill owners could release in open market. This would help the government check the vagaries of demand for sugar and supply of sugarcane. The levy on mill owners ensured that 10% of the output was provided to the government for supplying to the poor through the public distribution system.

After the CCEA meeting, Union food minister K V Thomas said, "The regulated release mechanism may be dispensed with immediately. Obligation of levy on sugar mills has been done away with for sugar produced after September 2012."

The Cabinet note for the meeting had admitted that the unshackling of the sugar industry would lead to price fluctuations of sugar just as it happens for other crops but suggested that the consumers would get habituated to it with time. Historically, the demand for sugar has risen during the festive periods between October and January.

The move is also going to lead to an additional subsidy burden on the government of Rs 3,100 crore leading to an overall bill of Rs 5,300 crore annually at present rates and volumes of supply.

The government has decided that the state governments will be asked to purchase their requirement of sugar for the PDS from open market and would be reimbursed by the centre for the difference in prices based on their existing share in the levy sugar supply.

Thomas said, "The government will bear the difference between the ex-mill price of Rs 32 per kg and retail sugar price of PDS at Rs 13.50 per kg."

The government's decision comes after a committee under C Rangarajan, chairman Economic Advisory Council to the Prime Minister, submitted its report recommending that sugar trade be put completely to market forces.