The Uttar Pradesh government has raised the levy quota for molasses to 18% for the year started October from 17% earlier, two state government officials said today.

The levy quota is the percentage of molasses sugar mills in the state are required to keep aside to sell to the country's liquor manufacturers, and is usually sold at a huge discount to open market prices of molasses.

"Actually it's not really an increase, it was 18% till June but due to the pandemic, it had been reduced which has now been restored. Impact as such of this increase would not be there but the whole policy is not in the interest of the (sugar) industry," one of the officials told Cogencis.

The molasses kept aside for levy quota in the state is currently sold at 120-125 rupees per 100 kg, compared with the open market price of around 500 rupees per 100 kg.

The state government has set up a new formula for calculating the levy quota as many mills in the state have started diverting molasses for production of B-heavy ethanol.

As per the formula, 18% levy would be calculated on 4.85% of the total cane crushed during the season.

Sugar mills have been seeking abolition of the levy quota as they are forced to sell molasses to distilleries at a discounted price.

Uttar Pradesh is the largest producer of sugar, molasses and ethanol in the country.