The Food Ministry is in favour of extending export subsidy for only 1.4 million tonnes of raw sugar in the ongoing 2014-15 marketing year.
"A cabinet proposal to extend export subsidy on raw sugar for 2014-15 marketing year (October-September) has been sent for inter-ministerial views. The Food Ministry has proposed a cap on quantity at 1.4 million tonnes," sources said.
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.
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 750,000 tonnes of raw sugar in 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 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 substantially below the cost of production and it has become difficult for mills to even pay the 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 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.
