New Delhi: The Centre Wednesday decided to give flexibility to state governments to set retail price of PDS sugar that has been kept unchanged at Rs 13.50 per kg since 2002.
The decision in this regard was taken by the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi.
"The CCEA has approved the proposal on PDS sugar price," an highly placed source said.
Now, state governments will have the flexibility to fix the retail price of sugar, either lower or higher than the existing rate, and bear the cost accordingly.
Sources said that the Centre would continue to give the sugar subsidy for state purchases at Rs 18.50 per kg.
After decontrol of the sugar sector in April 2013, state governments have been asked to buy sugar from the open market to meet the demand under the public distribution system (PDS). The Centre has been subsidising such state purchases up to Rs 32 per kg.
Some states like Gujarat and Kerala have been demanding that the Centre should either increase the subsidy for sugar purchase for this year and share transport cost or give freedom to increase retail price of PDS sugar.
About 2.8 million tonnes of sugar is required for PDS. At present, sugar is sold at the retail issue price (RIP) of Rs 13.50 per kg in ration shops.
The difference between RIP and the ex-mill price of Rs 32 per kg, which was capped for two years till September 2014, is being given as subsidy to states.
Even as sugar prices have gone up over the years and is presently ruling below Rs 35 per kg in the retail markets, the government has not hiked the PDS rate of sugar from 2002.
Prior to decontrol of the sector, it was mandatory on the part of millers to supply 10 percent of their total production to the government at a rate lower than the retail markets.