In order to help the cash-starved sugar industry to pay arrears to sugarcane farmers, the government notified export subsidy of Rs 3,300 per tonne on raw sugar shipments undertaken during the February-March period. As per the notification, the subsidy will be calculated every two months after taking into account the average exchange rate of rupee vis-a-vis the dollar.
According to the government notification, sugar factories, which produce raw sugar and undertake export either by themselves or through exporters will be eligible for this incentive provided from the Sugar Development Fund. The date of shipment would be the basis for determining the incentives. The incentive will be for 40 lakh tonnes of raw sugar produced and exported during 2013-14 and 2014-15 sugar seasons. To ensure the effective utilisation of released subsidy, sugar mills should either open a separate no-lien bank account or furnish details of the same at the time of submission of the claim.
The government has offered export cash subsidy to sugar mills because the industry faces a liquidity crunch with prices of the sweetener falling below the cost of production. At present, arrears to cane farmers have mounted to about Rs 10,000 crore. During December ’2013, the government had also approved Rs 6,600 crore interest-free loans to sugar industry for making payments to sugarcane farmers. India, world's second biggest sugar producer and largest consumer, only makes white sugar for domestic consumption and does not manufacture raw sugar. Meanwhile, the raw sugar segment is presenting a lot of exports opportunities for the country.