Raw sugar export subsidy may come down post April review

The  subsidy  for raw sugar export may  come down  upon  review  as cabinet committee has made Rs 3,333 per tonne as the ceiling for giving subsidy  which will be valid only upto  March 31, 2014 as per the cabinet proposal. 

 

According to officials, the minutes are yet to be released and the notification will have to wait for the final framework suggested. However sources said the subsidy amount will be reviewed every two months and  the scheme will be stopped in September  2014 when there will be a overall review   corresponding to the sugar production levels and sugarcane productivity in the new sugar season.  

The review of the subsidy will depend on the domestic sugar availability, price situation and most importantly the exchange rate fluctuations and global raw sugar prices. The ministry has made a provision of around Rs 1400 crore towards raw sugar export subsidy.

  

However the committee has kept the option open to exhaust the total raw sugar export limit of 40 lakh tonne to be exhausted either in one sugar season or two sugar season.

 

The country has produced about 8 lakh tonne of raw sugar till January 31, 2014 and is expected to produce another 10 lakh tonne of raw sugar in the remaining months of current season, reportedly.

 
With this subsidy, the government has allotted a three tier subsidy to the sugar industry. Firstly, the government decontrolled sugar, thus giving the freedom to the sugar mills to sell in the open market and not under the obligation to sell 25% of their produce under public distribution system at low prices. This decision according to official sources helped the sugar industry to save around save about Rs 3,000 crore annually.

 

Secondly, a sum of Rs 3000 crore was given in the form of interest subvented bank loan worth Rs. 6,600

 

Under the relief package, the Centre will provide an interest subvention of up to 12% for additional working capital loans to the sugar companies, equivalent to last three seasons excise duty, cess and surcharge on sugar. While the expenditure for the financial package will be fully met from the Sugar Development Fund, the loans would have a two-year moratorium and would have to be repaid in five years. The loans would be meant exclusively for the effecting cane price payment by the sugar mills.

 

Sugar undertakings with loans will be classified as non-performing assets and will also be eligible for the loan provided the State Governments concerned stand guarantee for the new loans, as per the scheme.

 

Thirdly, the subsidy for export of raw sugar accounts for around RS 1400 crore.

 

 The Rs 80,000 odd crore sugar industry is facing a cash crunch due to higher cost of production and lower selling prices in the wake of surplus sugar. The PM had appointed an informal group of ministers in November last year, to look in to the issues of sugarcane farmers and sugar industry.