Finance Minister Arun Jaitley might not offer Rs 18.50 per kg subsidy for purchase of sugar to states for selling at a subsidised rate via ration shops in his February 1 Budget 2017 and save about Rs 4,500 crore.
The Centre's contention is that there is no demarcation for BPL families in the new Food Law and there are apprehensions that state governments may divert subsidised sugar, which explains the current line of thinking, sources said.
At present, the scheme has a target of 40 crore beneficiaries of BPL (below poverty line) families. About 2.7 million tonnes of sugar per annum are required for PDS sale.
According to the existing scheme, states purchase sugar to be supplied through the public distribution system (PDS), popularly known as ration shops, from the open market at wholesale rates and sell at a subsidised rate of Rs 13.50 per kg. The states get subsidy at Rs 18.50 per kg from the central government.
According to sources, there are indications from the finance ministry that the existing sugar subsidy scheme could be discontinued from the next fiscal.
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