The sugar industry has urged the Centre to reverse its decision to cut incentives for raw sugar exports.

Industry representatives said that the Cabinet Committee on Economic Affairs had announced an incentive of Rs. 3,300 a tonne on raw sugar exports which was notified on February 28. The incentive was to have been recalculated every two months based on the rupee-dollar rates with higher incentive if rupee strengthens. A Vellayan, Chairman, EID-Parry, said that the decision to slash incentives will affect sugar mills’ liquidity and their ability to pay sugar farmers. Also, the inconsistency in policy will affect exporters’ credibility in the international markets.

Palani G Periasamy, President, South Indian Sugar Mills Association – Tamil Nadu, said the Government’s decision to reverse the policy was ‘shocking’. This will result in huge liquidity pressure on sugar mills and push them into deep distress.

Vellayan said the objective of the incentive was to boost raw sugar exports to address the domestic surplus. Following three years of high production, stocks are estimated to reach about 750 lakh tonnes (lt) by September 2014. This had hit domestic sugar prices and sugarcane arrears have mounted to over Rs. 12,000 crore, he said.

The plan had been to export over 40 lt of raw sugar. But just about 5 lt have been exported and the mills have committed to exporting about 4 lt.