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The government on Monday notified export subsidy of Rs 3,300 a tonne on raw sugar shipments undertaken during the February-March period.
The Cabinet Committee on Economic Affairs had approved a proposal in this regard in February to help the cash-starved industry to pay arrears to sugarcane farmers. “The incentive shall be at the rate of Rs 3,300 a tonne for February and March, and thereafter, be recalculated every two months after taking into account the average exchange rate of rupee vis-a-vis the dollar,” the notification said.
There would be, however, a quantitative limit of 4 million tonnes for subsidy. Raw sugar produced and exported during 2013-14 and 2014-15 marketing years (October-September) are eligible for subsidy.
Sugar mills, which produce raw sugar and undertake export of the same either themselves or through exporters are eligible for incentive. The date of shipment would be the basis for determining the incentives.
India, the world's second-biggest sugar producer, is sitting on huge stock of the sweetener. This year, output is likely to be 25 million tonne, higher than the domestic demand of 23.5 million tonnes.
The provision for giving incentives for raw sugar exports has been made by amending the Sugar Development Rules 2014 to include another rule: "The Central government may, from time to time, decide to defray expenditure for incentive towards marketing and promotion services for raw sugar production."
As per the notification, sugar mills should utilise the incentive amount to make payment of cane dues of farmers within three months of receipt of the subsidy amount. Mills are required to submit a utilisation certificate to this effect within a month.
"The incentive due to a sugar factory shall be utilised for making payment to farmers and shall be released after adjusting or recovering any amounts, if over-due, towards the Sugar Development Fund loans...," the notification said.
To ensure the utilisation of released incentive amount for payment to farmers, the sugar factory should either open a separate no-lien bank account and furnish details of the same at the time of submission of the claim.
It has been made mandatory for mills to register their export contracts priorly with the Director General of Foreign Trade (DGFT) for direct export of raw sugar or of deemed export of supplies against invalidation to advance authorisation holders.
The incentive will be reviewed before the commencement of the next sugar marketing year, the notification added.
The government has offered the export cash incentive to sugar mills as the industry faces a liquidity crunch with prices of the sweetener falling below the cost of production.
Arrears to cane farmers have mounted to about Rs 10,000 crore from about Rs 3,000 crore at the start of the current marketing year in October 2013.
In December, Centre had approved a Rs 6,600 crore interest-free loan to the sugar industry to help make payments to sugarcane farmers.
