New Dehli, July 3 - India is likely to lift controls on sugar mills from the next crop year and allow them to sell as much as they want in the domestic market, government sources said on Thursday.
Currently, sugar mills are forced to sell 10 percent of their output at cheap rates to the government for subsidised sales to the poor, while authorities decide how much of the remainder they can sell in the open market to keep prices stable.
"We have made up our mind to remove both (quotas) but the cabinet will have to clear the proposals, which will go a long way in transforming the sugar sector," a senior government official, who did not wish to be identified, said.
Another official with knowledge of the proposal confirmed the food ministry's intentions.
Last year, India allowed exports of the sweetener without government permission. Earlier, after striking export deals, mills had to wait for clearance from the food ministry before shipping consignments.
Analysts say a record output of 28.4 million tonnes in the last crop year to September 2007 helped the government move ahead with liberalisation of the sector.
Shanti Lal Jain, director general of the Indian Sugar Mills Association, a trade body of private sugar producers, said the further steps would be welcome.
"Levy sugar is taken from us at a much lower price, even below our cost of production for the supply to the public distribution system (PDS). This is very, very unjust," he said.
Jain said the sector should be governed by market forces.
"I am not against cheaper sugar being given to the PDS, but it should not at be at the cost of the industry. Let the government do it. Let them buy it from the open market and then subsidise," he said.
Trade officials say production is expected to drop to 26-27 million tonnes in the crop year to September 2008, down from a record production of 28.4 million tonnes the year before.
India is the world's biggest consumer of sugar, gobbling up 22 million tonnes of the sweetener a year.