The Food Ministry is likely to notify next week its decision to give freedom to mills to sell sugar in the open market and removing their obligation to supply the sweetener at subsidised rates for ration shops.

On 4 April, the Cabinet Committee on Economic Affairs (CCEA) had decided to partially decontrol the sugar sector, the only industry left under the government control.

'We will notify changes in regulatory controls on sugar mills next week. We are preparing the notification,' a senior Food Ministry official said.

As per the CCEA decision, regulated release mechanism, under which sugar quantity for open market sale is fixed by the government, will be abolished with immediate effect. Besides, mills will be freed from mandatory supply of 10 per cent of their production to the government at cheaper rate to meet ration shop demand.

The sugar to be supplied through ration shops will be purchased by the state governments and the Centre will bear the entire subsidy, which is estimated to double to Rs 5,300 crore after the decontrol.

Currently, sugar is sold at the retail issue price (RIP) of Rs 13.50/kg in ration shops. The difference between RIP and the ex-mill price of Rs 32/kg, which is capped for two years, will be given as subsidy to states.

The other controls on the sugar sector such as pricing, cane reservation area and minimum distance between two mills have been left to the state governments.

Sugar production in India — the world's second biggest producer and largest consumer — is estimated to be 24.5 million tonne (mt) this year, as against the annual demand of 22 million tonne.