The department of food is expected to raise the subsidy on raw sugar production for June and July, after a 31% cut in the doleout for the previous two months, sources said on Friday.

If the department sticks to the formula already cleared by the cabinet committee on economic affairs (CCEA) in February, the subsidy amount would be in the range of R4,000-4,100 per tonne, mainly due to appreciation of the rupee against the dollar since March, one of the sources said.

In May, the department had notified a subsidy of R2,277 per tonne for raw sugar production during April and May, compared with R3,300 per tonne approved by the CCEA for February and March. The industry protested the reduction, saying the CCEA had directed the food department to calculate the subsidy amount every two months, factoring in only currency fluctuation in the last seven days of the previous month.

Millers said based on the formula approved by the CCEA in February, the subsidy amount should have been about R3,800 per tonne for April and May due to appreciation of the rupee against the dollar during the review period, but the food department cut it without even approaching the CCEA for clearance. Since the CCEA had decided that the doleout amount would be reviewed every two months, factoring in only currency fluctuation, any change in the policy needs CCEA clearance again before being implemented.

Food minister Ram Vilas Paswan on Thursday asked food secretary Sudhir Kumar to fix the subsidy amount for June and July soon, said one of the sources.

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

While approving the subsidy amount of R3,300 per tonne for February and March, the CCEA had calculated the value of the rupee at 62.44 against the greenback. However, the domestic currency has since appreciated to 59.17 (till Friday) against the dollar.

Industry executives said raw sugar subsidy needs to be announced at the earliest this month so that exporters can firm up deals accordingly.