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Indian government lifts curbs on sales of sugar

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April 5, 2013 08:09 AM EST | AP

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NEW DELHI — India has decided to lift curbs on its $15.5 billion sugar industry that restricted sales of sugar on the open market and required mills to sell sugar to the government at a deep discount.

Food Minister K.V. Thomas said the Cabinet decided late Thursday that sugar mills will no longer face quotas on the amount of sugar they can sell or be forced to sell 10 percent of their output at a discount to the government's public distribution network. The discounted sales cost the industry 30 billion rupees ($547 million) annually.

The government will now purchase sugar on the open market and sell it at a subsidized rate through the public network intended for the poor.

The government's bill for subsidizing the purchase of sugar would double from the current 26 billion rupees to 53 billion rupees, Thomas said.

India is the world's second-largest producer of sugar and as well as the world's biggest consumer of the sweetener.

Thomas said that sugar prices would not rise as a result of the government's action.

The sugar industry was the only industry that had remained under government control in a throwback to an earlier era when most parts of the Indian economy were controlled.

"By arriving at the decision in the Cabinet, we've kept the interest of all stakeholders – farmers, consumers and the industry – in mind," Thomas said.

Freeing up sugar sales will prevent sharp swings in demand and imports that have led to volatility in global sugar prices.