)
The government is considering cash subsidy for the mills to manufacture raw sugar meant for exports. This comes soon after doling out Rs 6,600 crore interest-free loans to the sugar industry.
As regards to the cash subsidy, while the form and the amount of the subsidy is not yet decided, in principle, the subsidy will be for manufacturing of 40 lakh tone of raw sugar. A proposal to the cabinet will be sent shortly in this regard, said sources. The subsidy will be either be direct cash or in the form of export benefits like duty drawback etc. The government proposes to announce a lump sum amount meant for the mills manufacturing raw sugar.
Surplus sugar in the domestic market had led to slump in market prices and therefore export has emerged as an outlet for diverting excess sugar to balance the price situation and help recover cost.
However sources said that the demand for export market is primarily for raw sugar and not white sugar which is generally manufactured in India. Although there are no laws prohibiting manufacture of raw sugar but it is hardly traded.
Meanwhile the food ministry has urged the Ministry of Petroleum and Natural Gas to fasten the price fixation for ethanol to be procured by the oil marketing companies from sugar mills so that tendering of ethanol by OMCs could start, said sources. According to them, the petroleum ministry is already preparing a cabinet note for making ethanol blending to the extent of 10% of the total fuel consumption mandatory.
Few months back the sugar industry had urged the government to subsidise manufacturing of raw sugar to the tune of $25 per tonne. Reportedly, as per industry estimates, the price difference between white sugar and raw sugar in export market is approximately $50 per tone and the difference in the production cost is only $15 per tonne. So, the shortfall is $35 per tonne. Moreover raw sugar can be exported in bulk quantity.
Early this week, the Cabinet Committee on Economic Affairs (CCEA) has approved Rs 6,600 crore interest-free loans to the sugar industry with interest subvention of 12%, to be borne by the Sugar Development Fund.
The Food Ministry proposal before the CCEA was based on the recommendations of the informal group of ministers, which was set up by the Prime Minister under the chairmanship of Agriculture Minister Sharad Pawar to address the industry's cash crunch.
The loans will be provided by banks to sugar mills exclusively for making payments to sugarcane farmers, including arrears. The loans are equivalent to the excise duty paid by the mills in the past three years and the mills have to repay the loans in five years. These mills could avail of a moratorium on repayment for the first two years.
