In order to trim down financial burden and continue supply of subsidized sugar, Agriculture Ministry has favoured the Food Ministry's Cabinet proposal to raise excise duty on sugar to offset the financial burden on the Centre if it decides to buy the sweetener from the open market for ration shops.
Under the levy sugar system, mills are required to sell 10% of their output to the Centre at cheaper rates to run ration shops, costing Rs 3,000 crore to industry annually. Currently, the government buys sugar at Rs 17 per kg from millers and sells it at Rs 13.50 per kg in public distribution system (PDS). If the levy system is removed, the government will have to buy it at open market price.
Earlier, in October 2012, a committee headed by PMEAC Chairman C Rangarajan had recommended immediate removal of two major controls - regulated release mechanism and levy sugar obligation. The panel also recommended doing away with the regulated release mechanism under which the Centre fixes the sugar quota that can be sold in the open market.
Currently, the excise duty on sugar is about 70 paise per kg and the government requires about 27 lakh tonnes of sugar annually for PDS.
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