Government has fixed lower export subsidy of Rs 2,277 per tonne on raw sugar shipments to be undertaken during two months ending May this year, a move that drew sharp criticism from the industry.

To help the cash-starved industry to pay arrears to sugarcane farmers, the Cabinet Committee on Economic Affairs (CCEA) in February had announced a subsidy for export of raw sugar up to 4 million tonnes during 2013-14 and 2014-15 marketing years (October-September).

The export subsidy was fixed at Rs 3,300 per tonne for February-March of this year and it was decided that the rate will be reviewed every two months.

Issuing a fresh notification, the Food ministry said: “The incentive towards marketing and promotion services for raw sugar production for the period beginning from April 1 and ending on May 31, shall be at the rate of Rs 2,277 per tonne.” The Ministry has kept it lower after taking into account the average exchange rate of rupee vis-à-vis the US dollar.

Expressing disappointment over the lower subsidy rate, Indian Sugar Mills Association (ISMA) said, “The industry and exporters are perplexed....The Ministry has no authority to consider any other criteria than exchange rate to recalculate the incentive rate. It is deviating from the CCEA decision.”

ISMA, which has also aired its concerns to the Food Secretary, sought the logic behind slashing the subsidy rate.

It explained that the dollar-rupee exchange rate at the time of approval was 62.44. The exchange rate has since appreciated. It stood at 60.32 in the last week of March.

Therefore, the subsidy rate should have been revised upwards and would have been around Rs 3800 per tonne, it said.

ISMA also mentioned that the objective of reducing the subsidy rate is not understood because the country still has surplus sugar of about 75 lakh tonnes.

Cane price arrears of farmers are still at very high level at Rs 12,000 crore. “Hence the purpose of the scheme to clear cane price arrears not yet achieved,” it said.

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