The Government is considering incentivising exports of raw sugar of up to 40 lakh tonnes for two years. A decision to this effect was taken by the ministerial panel headed by the Agriculture Minister Sharad Pawar on Thursday.

“We have decided to give incentives to promote raw sugar as a new product. Incentives will be given for exports up to 40 lakh tonnes for two seasons,” Food Minister K.V.Thomas told reporters. The quantum of incentives would be worked out soon and the proposal may come up for discussion at the next Cabinet meeting.

The proposed incentives, to be provided from the Sugar Development Fund, would be compatible with the norms of the World Trade Organisation, sources said. The new capacity addition in sugar refineries in Asia and Africa in recent years has created a new market for Indian sugar mills to export raw sugar. While the Food Ministry has reportedly proposed an incentive of Rs 2,390 a tonne, the industry believes that mills should get at least Rs 3,500 as prices in the international market have declined to around 15.13 cents a pound, a three-year low.

At current prices, the export of sugar would result in a loss of around Rs 4,500 a tonne as the export price for raw sugar ranges between Rs 22,500 and Rs 23,500 a tonne against the production cost of Rs 26,500.

Trade sources said the Government move to incentivise raw sugar exports would add to the glut in the global market, thereby putting pressure on prices further.

In the 2013-14 sugar season that began in October, mills have exported about 5.3 lakh tonnes of raw and white sugar till December.

The Centre has recently announced an interest subsidy on bank loans to be availed of by sugar mills for paying sugarcane growers.

According to the Indian Sugar Mills Association, sugar production till mid-January stood at 85.50 lakh tonnes, some 21 per lower than corresponding last year. The lower production is on account of delayed start to cane crushing this season.

 So far, 484 mills have started crushing operations against 505 in the same period a year ago, as eight mills in Maharashtra and six in Tamil Nadu are yet to begin operations. Maharashtra has crushed some 294 lakh tonnes of cane to produce 31 lakh tonnes of sugar with a recovery rate of 10.54 per cent. Uttar Pradesh has produced 19.80 lakh tonnes of sugar crushing 224 lakh tonnes of sugarcane with a recovery rate of 8.84 per cent.

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