Complete levy decontrol of the sugar sector is unlikely to be announced in the Union Budget on Friday and the 10 per cent sale obligation of factories through ration shops is expected to be retained.

"Food Ministry has not recommended any easing out of the levy quota of sugar mills in the Budget. Unless such a decision is taken at the 'highest' level, levy decontrol is unlikely", official sources said.

Currently, 10 per cent of the total ex-factory monthly quota of the sugar mills is sold through the ration shops at Rs 13.50 per kg.

The levy obligation was reduced to 10 per cent from March one, 2002, to enable the sugar factories to sell more sugar under free sale quota in the open market and obtain better realisation from the market.

In the previous budget, the government had also mooted phased total decontrol of the sugar sector including doing away with the release mechanism for the commodity by the end of this fiscal.

The plan, however, has now been put on hold owing to drastic fall in open market prices which even went below the levy price after the government moved from a monthly release quota to quarterly quota, the sources said.

They said with the monthly release quota having been restored and price stability being the main objective, release decontrol is ruled out in the near future.

Under the present mechanism, government fixes the monthly quantum to be downloaded by each sugar mill in the market every month as an instrument for price management.

Sources said all the major demands of the sugar industry pending with the Food Ministry have been taken care of with the approval of ocean freight assistance for exports.

They said as far as the demands for relief on excise duty on molasses and sugar are concerned, the matter has been referred to the Finance Ministry by Prime Minister Atal Bihari Vajpayee and is not under the purview of the Food Ministry.

One of the problems faced by the sugar industry is that of mounting cane price arrears and to reduce them a series of measures have been taken including creation of a buffer stock of 2 million tonnes.

Complete decontrol of the sector has been put in abeyance as price stability is more important matter of concern due to surplus stocks available with the mills.

In the sugar year (October-September), 2001-02, production touched 18.3 million tonnes. With carry-over stock of 10.66 million tonnes from 2000-01, total availability of sugar was 28.96 million tonnes against the consumption requirement of 17.3 million tonnes.

This left a carry-forward stock of 11.66 million tonnes and with the production expected to be 17.5 million tonnes in the current season, 2002-03, the total availability will be a mammoth 29.16 million tonnes.

Any extra release of sugar into the market from the huge stocks over and above the projected consumer requirement could lead to a depressed market scenario as has been experienced in the past season, sources said, adding it would also affect the payment of cane prices to the farmers.

This has made effective release control essential and decontrol was not at all under consideration, they added.

PTI