Sugar export subsidy likely at Rs 3,500 per tonne: Pawar

Government is all set to announce a subsidy of Rs 3,500 per tonne on export of four million tonnes of raw sugar costing the exchequer Rs 1,400 crore, a move aimed at boosting overseas sale and bailing out the cash-starved industry.

The CCEA had twice deferred the decision on fixing the export subsidy this week as Agriculture Minister Sharad Pawar was in favour of higher subsidy of Rs 3,500 per tonne as against Rs 2,000 per tonne proposed by the Food Ministry.

Amid differences among the ministries, Pawar, Finance Minister P Chidambaram and Food Minister K V Thomas today met to resolve the issue. They finally agreed to fix subsidy of Rs 3,500 per tonne, aggressively pushed by the NCP chief.

"In the meeting, it has been decided to provide a subsidy of Rs 3,500 per tonne. The matter will now come before the CCEA soon," Food Minister K V Thomas told PTI after the meeting.

On a subsidy of Rs 3,500 per tonne, Thomas said the burden will increase to Rs 1,400 crore for export of 4 million tonnes of raw sugar in two years.

On the earlier proposal of Rs 2000 per tonne the burden would have been Rs 800 crore.

Subsidy will be reviewed after export of 2 million tonnes of raw sugar.

The subsidy will be borne largely from Sugar Development Fund under the Food Ministry, he added.

India, the world's second biggest sugar producer, is sitting on huge opening stock of the sweetener.

More over, the output in the current 2013-14 marketing year (October-September) is also expected to be higher at 25 million tonnes, against the demand of 23.5 million tonnes.

The Food Ministry has proposed a cash incentive to sugar mills for exports of raw sugar as the industry is facing a liquidity crunch with prices of sweetener being lower than the cost of production.

Sugarcane price arrears to farmers has reached about Rs 10,000 crore from about Rs 3,000 crore at the start of the current marketing year in October 2013.

In December, the government had approved Rs 6,600 crore interest-free loan to the sugar industry for making payment to sugarcane farmers.