A panel of ministers is believed to have decided on Monday to raise the import duty on raw sugar to 15% from the current 10%. The panel, comprising agriculture minister Sharad Pawar, finance minister P Chidambaram and food minister KV Thomas, took the decision to discourage cheaper inflows of the sweetener from overseas and enable domestic producers to clear cane arrears at the earliest, sources told FE.

Sugar mills owed farmers a record R12,500 crore for cane purchases until April 15, as cane prices remained elevated while returns from sugar sales failed to keep pace, according to latest official data.

Although cane arrears have somewhat eased since mid-April, battered finances of mills due to a 10-15% drop in sugar prices over the past 6-7 months have significantly eroded their ability to pay farmers for raw material purchases. A third straight year of surplus output, ample stocks and 6,50,000 tonnes of sugar imports since the marketing year started in October have dragged down wholesale prices of the sweetener, while key producer UP has raised cane prices by up to 17%.