While the Cabinet is expected to raise the subsidy to Rs 4,000 a tonne from Rs 3,371 next week, the powerful sugar lobby also wants a fresh loan-restructuring package despite managing to extract major concessions on bank loans earlier. During bumper harvests, the industry typically cites its inability to pay cane arrears to pressurize the government into doling out concessions such as export and loan subsidies.

This time, however, the export subsidies have been questioned at the WTO, where Australia, Brazil and the US have alleged the subsidies aren't compliant with global trade rules. The Indian Sugar Mills Association said this is probably the first time that the mills are unable to even pay the Centrefixed fair and remunerative price to the farmers.