Tamil Nadu government on Thursday strongly protested the Centre's decision to partially decontrol sugar sector, saying the move to remove levy obligation on sugar mills and decontrol the regulated release mechanism will adversely impact supply of the sweetener through PDS.
Chief minister J Jayalalithaa said that there was no clarity over the continuance of Centre's subsidy scheme in this matter beyond the financial year 2014-15.
At present, levy sugar released to Tamil Nadu by Centre was 10835 MT per month which met only one third of the total requirement for distribution under PDS.
Her government was already incurring heavy expenditure towards providing subsidy for supply of sugar through the PDS, she said in a letter to Prime Minister Manmohan Singh.
Under the new dispensation, Centre will 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 at Fair Price Shop levels, she said.
The state had been informed this subsidy by Government of India will be available only for the financial years 2013-2014 and 2014-2015, adding "there is no clarity whether this arrangement will continue beyond 2014-2015."
"The sudden withdrawal of levy obligation on sugar mills will expose the supply of PDS sugar to the vagaries of the market and the resultant volatility. Further, any price fluctuation over Rs. 32 per kg in the open market will have to be borne by the State, which is already saddled with a huge subsidy burden," she said.
The new arrangement will also create uncertainty in ensuring adequate supply of sugar through PDS at affordable cost to the poor, as the state will have to procure the entire stock from the open market, she added.
Jayalalithaa said the decision of Ministry of Food and Public Distribution to do away with levy obligation on sugar will have a severe impact on the welfare of the poor and downtrodden whom she said depend fully on PDS for sugar.
"I request you to reconsider the decision of withdrawing the levy sugar obligation on sugar mills and continue with the existing levy system of sugar in the interest of the public, or to guarantee that the entire difference between the open market price of sugar and issue price in PDS would be borne as subsidy by the Government of India and continue the subsidy beyond 2014-2015 as well," she said.
The decision to partially decontrol sugar sector, the only industry left under the government control, was taken by the Cabinet Committee on Economic Affairs (CCEA) last month.
Under the regulated release mechanism, the Centre fixes the sugar quota that can be sold in open market. Of late, this mechanism has been relaxed and the quota is now being released on half-yearly basis from the earlier monthly-wise.
In levy sugar system, millers are required to contribute 10% of their output to the Centre for running ration shops at cheaper rate.