India's raw sugar exports jumped sharply in the first half of the current marketing year that started on October 1 as mills — sitting on huge refined sugar inventories — sought to take advantage of a government subsidy for production of the raw variety to diversify their product basket.

However, a delay in notifying the subsidy for April and May by the food ministry has stoked fresh uncertainties about the exports, according to senior company executives.

India, the world's second-largest sugar producer and biggest consumer, exported 8,00,000 tonne of raw sweetener between October and March, compared with a paltry 4,000 tonne a year before.

In March alone, raw sugar exports were to the tune of 2,35,000 tonne, compared with a negligible quantity in the same month last year. Overall sugar exports — both raw and refined varieties — jumped to 1.45 million tonne during the October-March period, compared with just 35,000 tonne a year before, according to data compiled by the Indian Sugar Mills Association (ISMA).

In February, the government notified a decision to offer a subsidy of R3,300 per tonne for raw sugar production — meant mainly for exports as its domestic consumption is negligible — to encourage mills to diversify their product basket to cut huge inventory of refined sugar and improve realisation.

The Cabinet Committee on Economic Affairs (CCEA) had decided the quantum of the subsidy will be reviewed every two months, factoring in the fluctuation in domestic currency against the dollar.

While approving the subsidy amount of R3,300 per tonne, the cabinet committee had calculated the value of the rupee at 62.44 against the greenback.

However, the domestic currency has since appreciated to 60.59 on Monday, which means the subsidy amount has to be higher than the March level to make exports more competitive.

A source told FE that food minister KV Thomas on April 17 asked his ministry to continue with "the current scheme based on the calculations made earlier for the months of April and May 2014 as well".

However, the decision to keep the subsidy amount at the previous level of R3,300 per tonne is yet to be notified even after three weeks of this month.

According to the sources, the food department was weighing a proposal to lower the subsidy amount for April and May in view of a recent appreciation of international sugar prices. However, while approving the subsidy, the CCEA had directed the food department to change the dole-out amount factoring in only the currency fluctuation, so any change in that policy needs CCEA clearance again before being implemented.

With the polls under way and the election code of conduct in effect, it's difficult to get the CCEA to clear any changes to the policy at this juncture.

This has resulted in the apprehension that any delay in notification would adversely affect the exporters' ability to firm up deals.