At present, sugar is being sold at Rs 13.50 per kg in the public distribution system (PDS). This price has not been revised since 2002 despite increase in open market price to Rs 35-40 per kg.

 

After the decontrol of the sugar sector in May, the states have been asked to procure sugar from the open market to meet the ration shop demand from this month onwards. The difference of only upto Rs 18.50/kg is paid as subsidy to states.

 

"Since the procurement cost of sugar is high especially in north eastern regions, the state governments want to increase the retail issue price for PDS. I have discussed this issue with the Finance Minister. The cabinet has to take a decision," Thomas told reporters on the sidelines of a FICCI event.

 

A proposal to allow state governments to increase the retail price of sugar sold at ration shops has been prepared for cabinet's consideration, he said.

 

Sources said that the Food Ministry's proposal is to allow state governments to hike sugar price maximum by Rs one per kg. This will reduce the subsidy burden.

 

Prior to partial decontrol of the sugar sector, mills were mandated to supply 10% of their production to meet the PDS demand. The total requirement of sugar for PDS is about 27 lakh tonnes, of which offtake is only 20 lakh tonnes. The subsidy burden last year was Rs 5,300 crore.

 

Sugar production in the country is estimated at 24.5 million tonnes in 2012-13 marketing year (October-September), against the total demand of 22 million tonnes.