The Cabinet Committee on Economic Affairs (CCEA) is likely to consider tomorrow a proposal to give a cash subsidy of Rs 2,000 per tonne for export of four million tonnes of raw sugar for a period of two years.
"There are differences of opinion among the various ministries on the quantum of cash subsidy, which the CCEA will take a final call at tomorrow's meeting," sources said.
The Food Ministry has proposed a cash incentive of Rs 2,000 per tonne to the beleaguered sugar industry for export of four million tonnes of raw sugar. Total subsidy outgo has been pegged at Rs 800 crore spread over two years to be adjusted from the Sugar Development Fund (SDF).
But the Agriculture Ministry has a different view on the quantum of subsidy although the incentives proposed by the Food Ministry are in line with the recommendation made by a high-level informal group of ministers, headed by Agriculture Minister Sharad Pawar.
In 2007-08, too government had given subsidy of Rs 1,450 per tonne to export six million tonnes of sugar. The current incentive is being worked on the same lines, sources said.
Sources further said: "Pawar is in favour of a reasonable subsidy so that export of raw sugar kick starts. He in support of an incentive not less than Rs 3,500 per tonne."
The industry body Indian Sugar Mills Association (ISMA) has also suggested an incentive of Rs 3,500 per tonne on raw sugar export in view of weak global prices.
Currently, raw sugar exports from India are not viable as global prices are ruling much lower than the domestic production cost of Rs 26,500 per tonne.
India, the world's second biggest sugar producer but largest consumer, does not manufacture raw sugar and only makes white sugar for domestic consumption.
At present, sugar mills are facing cash crunch as sugar prices have come down below the cost of production in view of surplus supplies.They are also saddled with huge cane arrears.
To improve cash flow of sugar mills, the government has already announced interest subsidy on bank loans to be availed by them exclusively for paying cane farmers. This has been done in line with the recommendation of the Pawar-headed panel.
