New Delhi: The government on Monday deferred a decision on raising price of sugar sold through ration shops.

"The Cabinet Committee on Economic Affairs (CCEA) could not take up the proposal on sugar and other PDS issues in the absence of Food Minister K V Thomas," sources said.

At present, the government buys sugar at Rs 19.50 a kg from millers and sells it at a subsidised rate of Rs 13.50 a kg through the public distribution system (PDS). The PDS rate of sugar has not been changed since 2002.

The government sells 27 lakh tonnes of sugar every year to the poor through PDS.

To reduce subsidy burden, the Food Ministry had proposed increasing the price of sugar sold via PDS because the procurement price of the sweetener has risen each year with rise in sugarcane support price.

The ministry stated that the government will not have to pay any subsidy on PDS sugar if prices are raised to Rs 25.37 per kg. For sugar sold at every rupee lower than this threshold for supply under the PDS, the government will have to incur a subsidy of Rs 270 crore a year, sources added.

However, it had not recommended any specific amount of hike in sugar price and had left the decision to the CCEA.

It is mandatory for mills to sell 10 percent of their output to the government at below cost rates for supply to ration shops.

Against the country's annual sugar demand of 22 million tonnes, mills are estimated to have produced 26 million tone of sugar in the 2011-12 marketing year.


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