The maize subsidy enabled millers to offer stable prices of mealie-meal to consumers.
According to The Times of Zambia, agriculture and livestock minister, Bob Sichinga, said that the move was designed to reduce government losses incurred because of the subsidy.
The minister said that the government, via the Food Reserve Agency (FRA), had been incurring the losses for a long time when buying maize from small-scale farmers and selling it at a lower price.
"Cabinet has reluctantly authorised the removal of the miller-consumer subsidy," said Sichinga. "The implication of this removal is that the price of our staple food mealie-meal will inevitably have to rise."
He added that the original FRA budget had been exceeded by as much as 2,632 per cent between 2009 to 2012 and said that the FRA would continue to make heavy losses if the subsidy was maintained.
He confirmed that the floor price for maize would be maintained at KR65 (US$0.01).
The government has also introduced a barter system under which 659,000 of the 900,000 farmers are allowed to barter for fertiliser.