Govt restores sugar export subsidy at Rs 3,300/tonne till Sept 2015

The move will help the industry sell its surplus sugar and pay to the farmers on time in the next sugar season

The union government has decided to extend the export incentive scheme on raw raw sugar till the end of September 2015 to enable mills to clear the unpaid dues to farmers.

Officials in the know said it has simultaneously approved an export incentive of Rs 3,300 per tonne for the months of June and July, which is almost 45 per cent more than that approved for April and May.

Earlier, there was a proposal to suspend the export incentive scheme by September 2014, but it was turned down in view of mounting sugarcane arrears and falling price in the retail markets. The previous UPA government had decided to start a scheme to give an export incentive on raw sugar for two sugar seasons that is 2013-14 and 2014-15. This was to be reviewed after every two months in line with the change in dollar-rupee exchange rate.

However, later, it was decided to suspend the scheme by the end of 2013-14 sugar season that is September 2014 because it was felt that there was not adequate interest in the scheme.

However, the new government has decided to restore the subsidy to the original planned Rs 3,300 per tonne, but has also decided to continue with the scheme for another year.  

"The subsidy can be fixed at the current levels for the rest of the period that it till October 2015, but a final call on the same is yet to be taken," a senior food ministry official said.

Welcoming the move, Director General, India Sugar Mills Association (ISMA) Abinash Verma said that the sugar industry, reeling under financial crisis, feels that this positive step to rectify the earlier mistake of unnecessarily reducing the export incentive, gives a lot of confidence to the sector that the new Government will be fair in their decisions and positive towards farmers' interests.  

"This will help the industry sell their surplus sugar and pay to the farmers on time in the next sugar season," Verma said.

According to industry estimates, sugar mills owe about Rs 12,000 crore to farmers. Though the crushing season, which started in October 2013, has almost ended, cash-starved mills are unable to clear arrears, as sugar prices are lower than production costs.

In the 2013-14 marketing year, sugar production in India, the world's second-largest producer and largest consumer, is estimated to decline four per cent. The country's annual demand is estimated at 23-23.5 mt.