Govt may give Rs 2,000/t subsidy on raw sugar export

Amount has been calculated based on suggestions from finance ministry and a cabinet note on the same is expected soon

To absorb surplus sugar and to promote export of around four million tonnes of raw sugar, the central government is planning to give a cash subsidy of around Rs 2,000 per tonne.

According to a senior official, the amount has been calculated based on the suggestions from the finance ministry and a cabinet note on the same is expected to be floated soon.

The total subsidy outgo as per the calculation could be somewhere around Rs 800 crore spread over two years. Officials said the government is also working on curb the import of sugar by increasing the import duty from the current 15 per cent. “The quantum of increase is still being decided and a final decision on the same will be taken in a the new few days,” the official explained.

The incentives are in line with the recommendation made by a high-level informal group of ministers chaired by Agriculture Minister Sharad Pawar. The panel had recommended that government should provide incentive to produce 4 million tonnes of raw sugar will be on a per-tonne basis and will be adjusted from the Sugar Development Fund (SDF).  sugar exporter.

In 2007-08, too the government had given a subsidy of around Rs 1,450 per tonne to export 6 million tonnes of sugar. The current incentive is being worked on the same lines, but will be only for exporting raw sugar.   

Trade sources said if the incentive is provided at the right time India can export around 2 million tonnes of raws in the international market, largely to Indonesia, Iran, Sri Lanka, and the Middle East.

India traditionally does not produce raw sugar and only makes white sugar which is widely consumed within the country. Industry players said unless government helps in shipping out some excess stock, the mills will be saddled with huge surplus.

According to some assessment, India is expected to have surplus of over 4 million tonnes by the end of 2013-14 sugar crushing season (October-September). However, with 2014-15 season again expected to be bumper, there could be another glut in the market experts feel.

Last month, the cabinet committee on economic affairs (CCEA) cleared a proposal to allow mills access Rs 6,600 crore of interest-free loans. The interest-free loans will be disbursed to mills through a separate bank account to ensure its strict monitoring.

The entire interest burden estimated at Rs 2,750 crore over the next five years, will be borne by the government from the Sugar Development Fund (SDF). The Rs 80,000-crore sugar industry has been facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus output over the past few years.   

Apart from interest-free loans and incentive to export raw sugar, the Pawar lead panel had also recommended setting up a buffer stock and doubling of ethanol blending in petrol to 10 per cent.