The Cabinet Committee on Economic Affairs (CCEA) on Thursday decontrolled the sugar sector by doing away with two archaic policies.

First, it abolished the levy sugar mechanism – which the sugar producing companies were liable to sell 10% of their produce to the government at subsidised rates of Rs10 per kg less than the open market price – for two years, to start with.

The move will release almost 3 million tonne (mt) from the ambit of subsidised prices.

Second, it did away with the regulated release order mechanism under which companies had to sell a certain percentage of their produce in the open market.

The manufacturers can now sell as much as they want and depend on their marketing expertise to push sales.

The total sugar producing capacity of the country currently stands at 25 mt approximately plus an average yearly inventory of 6 mt recorded at the start of the season on October 1.

Of this, 3 mt was sold at subsidised rates.

Now, these companies can sell their produce at the open market price – which has been capped at Rs32 per kg, up from Rs31 so far – and thereby add to both topline and bottomline.

That boosts the prospects of Bajaj Hindusthan, Balrampur Chini and Renuka Sugar, said an analysts.

SUBSIDIES RISE,  DUTY UNCHANGED
Govt to buy sugar for the public distribution system from the open market at prevailing rates

This will push up the subsidy burden to around Rs5,600 crore, up more than Rs2,000 crore, according to an analyst

No hike in excise duty on sugar, now at Rs95 per quintal

States free to decide the minimum distance between mills and the cane prices