The food ministry will soon approach the Cabinet Committee on Economic Affairs (CCEA) for a decision on whether to continue the incentive scheme for limited raw sugar production beyond the current marketing year through September 30, sources said on Tuesday.

"The CCEA may like to take a view regarding the continuity of the incentive scheme beyond the end of the current sugar season," a draft note said.

The raw sugar subsidy scheme was introduced in February this year following a decision by the CCEA, aimed at helping mills cut a glut in refined sugar and improve cash flows.

Although a notification following the CCEA decision had provided that "the incentive shall be for a quantitative limit not exceeding forty lakh metric tonnes of raw sugar produced and exported during 2013-14 or 2014-15 sugar season", it had also said the "incentive shall be reviewed before the commencement of the next sugar season".

Sources said the food department had last month sought the approval of food minister Ram Vilas Paswan to restrict the incentive scheme to the 2013-14 marketing year itself, which wasn't, however, accepeted by the minister.

"The current move to approach the CCEA for a review of the scheme is in sync with the CCEA decision in February," one of the sources told FE. Since there is hardly any domestic consumption of raw sugar, the scheme is effectively meant for exports. Raw sugar exporters are eligible to get Rs 3,300 per tonne subsidy until end-July under the scheme.

The latest draft note for CCEA approval also said: "The incentive be recalculated for the balance period, that is August to September, on the basis of the average exchange rate of the rupee vis-a-vis the dollar as well as average international future prices of raw sugar as on the seven days immediately preceding each bi-monthly period, as has been done for April and May and June and July 2014.

The date of the shipment will continue to be taken as the basis for determining the incentive."

The country has exported around 5,00,000 tonnes of raw sugar so far this year under the scheme. The country had exported just 0.34 million tonne of sugar, both raw and refined, last year. The CCEA had announced the subsidy of Rs 3,300 per tonne for February and March, although the department of food cut the subsidy amount by 31% to Rs 2,277 per tonne for April and May, triggering protest from the sugar industry.

Millers complain the department has effected the cut by changing the formula for calculating the subsidy, going against the CCEA decision. Last month, the food department again restored the incentive at Rs 3,330 per tonne for June and July. Sugar output will likely hit 24.2 million tonnes in 2013-14, compared with 25.14 milllion tonnes a year before, according to the Indian Sugar Mills Association. Consumption is expected to go up by 5.3% to 24 million tonnes this year, it added.