Revision of sugar export subsidy to hit industry, says Murugappa chief

From the moves made it would appear that there is no respect for the decisions taken by Cabinet Committee and the bureaucrats can overrule it, he says

The Central government's decision to revise the export subsidy downwards from the earlier Rs 3,300 a tonne to Rs 2,277 a tonne would further affect the liquidity and hurt the credibility of India with foreign buyers who have contracted, said A Vellayan, Executive Chairman, Murugappa Group.

Speaking to the reporters about the incentive rate announced by the Ministry on May 12, at a reduced rate and its impact on the industry, he said that while the raw sugar exported so far is around 16 lakh tonne, only 5 lakh tonne is exported under the decision of Cabinet Committee on Economic Affairs (CCEA).

The CCEA wanted the export around 40 lakh tonne and they have given enough time, for two sugar seasons, 2013-14 and 2014-15, for sugar exports upto 30 Sept, 2014. If the incentivised exports are not taking place, the rest of the targeted raw sugar supply would be added to the surplus sugar of 7.5 million tonnes closed on September 30, 2014. He reminded that the cane price arrears of farmers are at Rs 12,000 crore and the purpose of the scheme to clear cane price arrears is not yet achieved.

"From the moves made it would appear that there is no respect for the decisions taken by Cabinet Committee and the bureaucrats can overrule it," he said. "This kind of reversal in policy implementation also smacks lack of transparency and leads foreigners to doubt what goes on behind such moves," he added.

He added that unless this move is reversed, the industry will have no option but to go to the Court which will be a money and time consuming excersise for a matter which does not need to be a legal issue at all, if the cabinet decision is implemented properly.

According to the Gazette notification - which came after suggestion of an Informal Group of Ministers (IGOM) formed to address the issues in the Sugar sector - issued on Februrary 28, the rate of incentive was fixed at Rs 3,300 per ton of raw sugar exports, payable as per date of shipments.

It was also laid down in the notification that the incentive rate would be recalculated every two months, taking into account the rupee-dollar exchange rate, prevailing in the seven days prior to start of the two month period.

The incentive rate for April and May should have been recalculated as per the exchange rate in last week of March, 2014. "Since the rupee has only appreciated from Rs 62.44 to $ 1 as on Feb 12, 2014 (CCEA decision date) to around Rs 60.5 to $ 1 in last week of March, the rate of incentive should have only been increased to Rs 3800 to 4000 or so. Instead the incentive rate announced by the Ministry on May 12, has been reduced to Rs 2,277 per ton," alleged the Group.