Food Ministry favours 1.4 mn tonne cap on sugar export subsidy

Last year, subsidy was available for 4 million tonnes, to help cash-starved industry clear sugarcane arrears to farmers

Food Minister Ram Vilas Paswan today said his ministry is in favour of extending export subsidy to only 1.4 million tonnes of raw sugar in the ongoing 2014-15 marketing year.

"A cabinet note has already been circulated. But a final decision has not yet been taken on the issue. However our Department's view is that export subsidy should be given for up to 1.4 million tonnes sugar," Paswan said on the sidelines of an Assocham event here.

About 1.4 million tonnes of sugar exports can be undertaken as the country would be left with surplus quantities even after meeting the domestic demand of 24.8 million tonnes during this year, he said.

Although sugar output is pegged at 25 million tonnes in the ongoing 2014-15 marketing year (October-September), it could surpass the target, he added.

Last year, the Centre had announced a subsidy for exports of raw sugar of up to 4 million tonnes in order to help the cash-starved industry clear sugarcane arrears to farmers. The subsidy scheme ended in September 2014. It had reviewed the quantum of subsidy every two months.

The Food Ministry had first fixed subsidy at Rs 3,300 per tonne for February-March, and later reduced it to Rs 2,277 for April-May. The same was reinstated at Rs 3,300 for June- July before hiking it to Rs 3,371 for August-September period of last marketing year.

Sugar mills exported about 7,50,000 tonnes of raw sugar during the 2013-14 marketing year (October-September) with an incentive of about Rs 200 crore.

The sugar industry is seeking extension of the export subsidy for this year as well saying mills are facing liquidity crunch to make cane payment in the wake of depressed local prices due to higher production in the last few years.

Indian Sugar Mills Association (ISMA) said that domestic sugar prices are below the cost of production and that it has become difficult for mills to even pay cane price to farmers.

Sugar production in India - the world's second biggest producer after Brazil - has increased by 27.3 per cent to 7.46 million tonnes in the first three months of the current 2014-15 season, according to the ISMA.

ISMA estimates sugar production at 25-25.5 million tonnes for this season, while the government's projection is at 25.05 million tonnes for the same period.

During 2013-14 season, the country had produced 24.4 million tonnes sugar and exported 2.11 million tonnes.