Govt clears export subsidy for raw sugar

Amount not decided; aim to help mills reduce surplus

A Group of Ministers headed by Agriculture Minister Sharad Pawar on Thursday approved a cash incentive for export of four million tonnes of raw sugar for two years. The idea is to help mills reduce their surplus stock.

The amount of subsidy has not been decided. The ministry of food and consumer affairs will calculate and circulate a cabinet note on the subject. “We have decided to give incentives to promote raw sugar as a new product,” Food Minister K V Thomas told reporters after the meeting.

The group was set up on the direction of Prime Minister Manmohan Singh. In 2007-08, a similar subsidy was given but for all kinds of sugar. This time, it is to be limited to raw sugar and to adjusting the difference between production cost and the international sale price.

Officials said the food ministry had proposed an incentive of Rs 2,390 a tonne on raw sugar, with the burden shared by the Centre and state governments; it would cost at least Rs 1,000 crore over two years. However, the panel is believed to have disfavoured this and asked for a reworking of the amount, they said.

The Indian Sugar Mills Association had suggested an incentive of Rs 3,500 a tonne, which would cost the exchequer Rs 1,400 crore. It noted the global price was Rs 22,500 a tonne, against the domestic production cost of Rs 26,500 a tonne, sources said. “The government should move fast in notifying the subsidy, as the sugar season will come to an end in two to three months,” a sector official said. Mills are facing a cash crunch as prices have come below the cost of production, in view of surplus availability. They also have huge cane payment dues, projected to reach Rs 15,000 crore by the end of the 2013-14 sugar season in September.