The government is expected to take a decision next week on continuing an incentive scheme for limiting raw sugar production after the current marketing year through September 30, sources said on Thursday.
The food ministry has already circulated a note for the Cabinet Committee On Economic Affairs (CCEA) to "take a view regarding the continuity of the incentive scheme beyond the end of the current sugar season".
In February, the CCEA had approved the scheme in to help mills diversify their product base and cut a glut in refined sugar so that their cash flows improve and they would clear cane dues to farmers.
Although a notification after the CCEA decision had provided that "the incentive shall be for a quantitative limit not exceeding 40 lakh metric tonne raw sugar produced and exported in 2013-14 or 2014-15 sugar season", it had also said the "incentive shall be reviewed before the next sugar season".
Since there is hardly any domestic consumption of raw sugar, the scheme is effectively meant for exports. Raw sugar exporters are eligible for a subsidy of Rs 3,371 per tonne for two months until end-September under the scheme. For June-July period, the incentive was as much as Rs 3,300 per tonne.
The incentive is calculated 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 in the seven days immediately preceding each bi-monthly period. The date of the shipment is taken as the basis for determining the incentive.
Sources had earlier said that the food department had sought an 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 country has exported around 7,00,000 tonnes of raw sugar so far this year under the scheme. The country had exported just 3,40,000 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 had 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 had 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.
The Indian Sugar Mills Association (ISMA) requested the government on Wednesday to continue with the incentive scheme in 2014-15 so that the approved quantity of a total of four million tonnes of raw sugar can be exported.