New Delhi: The government Thursday approved subsidy on export of up to 1.4 million tonnes of raw sugar in the ongoing 2014-15 marketing year, a move that would boost millers' cash-flow and enable them to clear mounting sugarcane price arrears that have crossed Rs 12,000 crore.
A decision in this regard was taken in the meeting of the Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi today.
"The CCEA has approved the continuation of the incentive scheme for marketing and promotion services of raw sugar production during 2014-15 (October-September) for a quantity of 1.4 million tonnes," an official statement said.
The CCEA further approved an uniform rate of export subsidy at Rs 4,000 per tonne for the 2014-15 marketing year.
"Other conditions will remain the same, as were last year except that in case of mills having alcohol production capacities, the incentive would be available if they offer to supply ethanol to Oil Marketing Companies (OMCs) under the Ethanol Blending Programme (EBP) up to 25 per cent of their annual production level of alcohol," it added.
Last year, the Centre had announced a subsidy for exports of raw sugar 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 as the new government did not extend for the current marketing year.
The quantum of subsidy fixed at Rs 4,000 per tonne for this year is much higher than Rs 3,371 per tonne fixed last year for August-September period.
In the previous year, sugar mills had exported about 7.5 lakh tonnes of raw sugar under the export incentive scheme entailing Rs 200 crore subsidy burden on the exchequer.
Welcoming the decision, Indian Sugar Mills Association (ISMA) said, "Sugar mills will need to gear up to produce the 1.4 million tonnes of raw sugar in the balance 1-1.5 months of crushing period remaining."
Since the beginning of the current marketing year, the cash-starved sugar industry had been seeking extension of the export subsidy to offload surplus sugar in the global market and check sliding ex-factory sugar prices, which are currently ruling at three-year lows.
"As on February 15, 2015, cane price arrears for the current 2014-15 season across the country stood at Rs 12,300 crore," ISMA had said yesterday.
It had said that sugar prices have declined by Rs 5-6 per kg since October last year and are ruling at the lowest level in the last 3-4 years.
ISMA estimates sugar production at 26 million tonnes in the current marketing year, against last year's 24.3 million tonnes. The demand is seen at 24.8 million tonnes for this year.
At the current global and domestic prices, raw sugar exports from India are just about viable with the incentives, ISMA Director General Avinash Verma said.
As per ISMA estimates, there is a surplus sugar of around 2.5 million tonnes and therefore the industry will require incentives for another 10-15 lakh tonnes, he demanded.
"This is the only way forward for the industry to pay cane price even at the Fair and Remunerative Price (FRP) level this season, otherwise the cane price arrears which are at Rs 12,300 crore will very soon cross Rs 13,000 crore recorded in last season," he added.
FRP, which is fixed by the Centre, is the minimum purchase price of sugarcane mills pay to farmers.
