Ministry allows use of sugar development fund to incentivise raw sugar exports

Millers need to pay farmers within three months

The department of Food has linked  Sugar Development Fund with production and export of raw sugar and ethanol. 

According to the amendments made in the Sugar Development Fund, the funds can be used for marketing and promotion of raw sugar. While this amendment is specifically made for sugar season 2013-14 and 2014-15, a provision has been added as per which such funds may be diverted for promotion of raw sugar anytime. 

For sugar factories that have ethanol production facilities, this incentive will be available on export of raw sugar only if they offer to supply ethanol equal to their ethanol production capacity or 25% of their annual alcohol production whichever is less to the oil marketing companies.   

As per the directions, millers should utilise the incentive for making payment to farmers within three months of its receipt and utilisation to this effect should be submitted within one month through Sugar commissioner or Cane Commissioner. To ensure the incentive amount is used for making cane arrears, millers have been asked to open a separate no-lien bank account and furnish details of the same at the time of submission of the subsidy claim.

Prior to the amendment, the Sugar Development Fund was used for giving loans to facilitate rehabilitation and modernisation of any sugar factory or any unit thereof, expansion of crushing capacity, any scheme for development of sugarcane in the area in which a sugar factory is situated, bagasse-based cogeneration power projects with a view to improving their viability and for production of anhydrous alcohol or ethanol with a view to improving their viability.

The government recently notified fixed subsidy of Rs 4,000 a tonne for export of up to 1.4 million tonne of raw sugar in the ongoing 2014-15 marketing year (October-September).

Last month, the Cabinet Committee on Economic Affairs (CCEA) had approved extension of subsidy on raw sugar export to help boost millers' cash flow and enable payment of sugarcane arrears to farmers. Cane arrears have crossed Rs 14,500 crore so far.

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

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 tonne of raw sugar under the export incentive scheme, entailing a subsidy burden of Rs 200 crore.