The Cabinet Committee on Economic Affairs (CCEA) is expected to consider Food Ministry’s proposal soon to give a cash subsidy of Rs 2,000 per tonne to the beleaguered sugar industry for export of four million tonnes of raw sugar for a period of two years. Total subsidy outgo has been pegged at Rs 800 crore that will be adjusted from the Sugar Development Fund (SDF). India, world's second biggest sugar producer but largest consumer, only makes white sugar for domestic consumption and does not manufacture raw sugar. Meanwhile, raw sugar segment presents a lot of exports opportunities for the country. The government had already given subsidy of Rs 1,450 per tonne in 2007-08 to export six million tonnes of sugar and the current incentive is being worked on the procedure.
However, there are differences of opinion among the various ministries on the quantum of cash subsidy as Agriculture Minister Sharad Pawar is in favour of a reasonable subsidy not less than Rs 3,500 per tonne in order to provide major boost to the exports of raw sugar. Furthermore, the industry body Indian Sugar Mills Association (ISMA) has also suggested same incentive of Rs 3,500 per tonne on raw sugar export in view of weak global prices.
It could be a difficult task for India to export raw sugar as global prices are ruling much lower as against the domestic production cost of Rs 26,500 per tonne. Further, domestic sugar mills are facing cash crunch as sugar prices have come down below the cost of production in view of surplus supplies. Meanwhile, the government has been taking measures to improve cash flow of sugar mills. Recently, it has announced interest subsidy on bank loans to mills for paying cane farmers.
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