The government has notified the Cabinet Committee on Economic Affairs' (CCEA) decision to remove two key controls on sugar sector.
CCEA had on April 4 decided to decontrol the sugar sector by giving freedom to mills to sell sugar in the open market and removing their obligation to supply the sweetener at subsidised rates for ration shops.
The other controls on the sugar sector such as pricing, cane reservation area and minimum distance between two mills have been left to the state governments.
According to the gazette notification dated May 2, the Food Ministry has rescinded the control over sugar industry, especially on sugar sale in the open market and public distribution system (PDS), through Essential Commodities Act and Sugar Control Order.
As a result, the regulated release mechanism - under which sugar quantity for open market sale is fixed by the government - has been abolished with immediate effect.
Besides, mills are freed from mandatory supply of 10 per cent of their production to the government at cheaper rate to meet ration shop demand.
The sugar to be supplied through ration shops will be purchased by the state governments and the Centre will bear the entire subsidy cost, which is estimated to double to Rs 5,300 crore after the decontrol.
Currently, 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 is capped for two years, will be given as subsidy to states.
Sugar production in India - the world's second biggest producer and largest consumer - is estimated to be 24.5 million tonnes this year, against the annual demand of 22 million tonnes.