CM criticises move to remove levy obligation on sugar mills

Chief Minister Jayalalithaa has strongly opposed the Centre’s decision to remove the levy obligation on sugar mills, contending that it will impact on the public distribution system in the State.

Under the levy obligation, as part of the regulation of the sugar sector, every sugar mill mandatorily surrenders 10 per cent of its production to the Central government at a pre-determined price, which is, at present, Rs. 1,904.82 per quintal. This enables the government to get access to low-cost sugar stocks for distribution through PDS. At present prices, the government saves about Rs. 3,000 crore on account of this policy – the burden being borne by the sugar sector. The Union government has now done away with this obligation.

In a letter addressed to Prime Minister Manmohan Singh, she said on Thursday that at present, the Union government released 10,835 tonnes of levy sugar to Tamil Nadu, which met only one third of the total requirement of PDS. The State government incurred a heavy expenditure on sugar subsidy.

About 35,000 tonnes of sugar are distributed through PDS every month. The Centre provided 10,832 tonnes of sugar at the levy price of Rs. 20 per kg.

The shortfall is made up with the commodity bought by the Tamil Nadu Cooperative Sugar Federation at open market rates, which are in the range of Rs. 34 to Rs. 37 per kg. PDS sugar costs Rs. 13.50 a kg. Cardholders with rice option get 500 gm per person up to a maximum of two kg per month and those with sugar option get an additional three kg. The State government provided Rs.682.48 crore per annum as sugar subsidy. Under the new arrangement, the Centre would provide a subsidy of Rs.18.50 per kg only for the quantity committed under levy, but to be procured in the open market, with a rider to retain the retail price of Rs.13.50 per kg. As per the Centre’s communication, the subsidy would be available only for 2013-14 and 2014-15 and there was no clarity whether it would continue beyond 2014-15.

The Chief Minister pointed out that the sudden withdrawal of levy obligation on sugar mills would expose the supply of PDS sugar to the vagaries of the market.

In the new arrangement, any price fluctuation over Rs.32 per kg in the open market would have to be borne by the State. She felt it would only create uncertainty in ensuring adequate supply of PDS sugar at affordable cost to the poor as the State would have to procure the entire stock from the open market.

In her view, the decision to do away with the levy obligation on sugar would have a severe impact on those who fully depended on PDS and hence it should be withdrawn and the existing arrangement continued. Or the Centre should guarantee that the difference between the open market price and PDS issue price would be borne as subsidy and continue it beyond 2014-15.

  • “Any price fluctuation over Rs.32 per kg in the open market will have to be borne by the State”

  • “Uncertainty will prevail in ensuring enough supply of PDS sugar at affordable cost to poor”