The Government will offer an export incentive of  Rs3,333 a tonne to sugar millers for shipping raw sugar abroad over a two-month period. This will help move out surplus sugar, while stabilising domestic prices, which hit a five-year low in the recent past.

After deferring thrice over differences between the Agriculture and Food Ministers on the quantum of subsidy to be offered, the Cabinet Committee of Economic Affairs on Wednesday approved the export incentive. The scheme will be reviewed after two months in April, sources said.

Raw sugar shipments of up to 40 lakh tonnes will be allowed over two seasons including the current season to September. The proposed move will directly benefit sugar mills in Maharashtra and Karnataka provided they ship out the raw sugar over the next two months. Other sugar producers will indirectly stand to benefit on expectations that domestic prices will stabilise.

The Indian Sugar Mills Association welcomed the Government’s decision to assist the sugar industry in disposing of the surplus sugar. Though not much time is left for producing raw sugar in the balance crushing period during the season, ISMA expects that this will give the much-required liquidity to the sugar mills. This, in turn, will help them clear a part of the cane price arrears that have already crossed Rs 10,000 crore.

“Since the window to produce raw sugar is very short, we would pray for an early notification of the scheme and procedure” ISMA Director-General, Abinash Verma said in a statement.

Raw sugar is being taken up as a new product in India’s export basket. The proposed export incentives, compatible with the norms of the World Trade Organisation, are to be provided from the Sugar Development Fund. The new capacity addition in sugar refiners in Asia and Africa in recent years has created a new market for the Indian sugar mills to export raw sugar.

While the Food Ministry had earlier felt that an incentive of Rs 2000 was enough for raw sugar exports, Agriculture Minister Sharad Pawar was insisting that the subsidy should be pegged at Rs 3500. Eventually, it was agreed upon to offer a subsidy of ₹3300, which would result in a fiscal burden of up to Rs 1,300 crore, if the sugar millers manage to ship out the entire 40 lakh tonnes over the two-month period.

In the current sugar season, Indian mills have exported about 6 lakh tonnes of raw and white sugar till January-end, while another three lakh tonnes are in the pipeline. By February-end or early March, sugar exports are expected to cross one million tonnes. Sugar production till January-end stood at 11.5 million tonnes, down 16.6 per cent over corresponding last year. The Centre has recently announced an interest subsidy on bank loans to be availed by sugar mills for paying cane farmers.