The cabinet committee on economic affairs (CCEA) on Wednesday agreed to offer a subsidy of R3,333 per tonne for raw sugar exports, after deferring a decision thrice amid differences between the ministries of agriculture and food, sources said.

The government is expected to review the subsidy in the short term, factoring in prevailing prices globally.

Last week, agriculture minister Sharad Pawar had strongly favoured offering R3,500 per tonne subsidy on raw sugar exports up to 4 million tonne over the next two years, rejecting the food ministry's proposal to provide R2,000 per tonne.

The subsidy would be provided from the sugar development fund under the food ministry. The move is aimed at encouraging cash-starved mills to diversify their product base and cut a glut in refined sugar.

Sitting on huge stocks, exporters in Brazil have been offering discount over the New York futures prices since October, which could compound the worries of Indian mills wishing to export raw sugar.

Importantly, global sugar inventory is expected rise to 43.4 million tonne in the current year through September 30, the biggest since at least 1960, according to the US department of agriculture.

This means prices may remain subdued in the global market for some more time. Raw sugar futures in New York was trading at 15.89 cents per pound on Wednesday, up marginally by 0.16%.

The government's move to subsidise raw sugar exports was part of a series of recommendations by the Pawar-led panel last month to bail out the cash-starved sugar industry and hasten the process of clearing cane arrears.

Subsequently, the CCEA on December 26 approved modalities for extending interest-free loans worth R6,600 crore to the sugar industry.

However, another key

recommendation of the panel to double the limit of ethanol blending with petrol to 10% is yet to be taken up by the CCEA.