An informal group of ministers (GoM), headed by Agriculture Minister Sharad Pawar, has approved incentives to the beleaguered sugar industry for exports of up to 40 lakh tonnes of raw sugar for two years.
The PM-constituted panel was set up to address the financial problems being faced by the sugar industry.
In line with the panel's recommendations, the Centre has already announced interest subsidy on bank loans to be availed by sugar mills for paying cane farmers.
"We have decided to give incentives to promote raw sugar as a new product. Incentives will be given for export of up to 40 lakh tonnes for two seasons," Food Minister KV Thomas told reporters after the meeting.
The quantum of incentives would be worked out soon, taking inputs from the Finance Ministry, he said. This proposal may come for discussion in the next Cabinet meeting, the minister added.
Thomas said the policy of incentives is compatible with World Trade Organisation's (WTO) norms and would be reviewed constantly.
Incentives would be given per tonne raw sugar basis from the Sugar Development Fund of the Food Ministry, he added.
Besides Thomas, Finance Minister P Chidambaram and Civil Aviation Minister Ajit Singh were present at the meeting.
According to sources, the Food Ministry has proposed an incentive of Rs 2,390 per tonne on raw sugar with the burden to be shared by both the Centre and state governments. However, the panel is believed to have disfavoured and asked to rework the quantum of incentives, they said.
Indian Sugar Mills Association has suggested an incentive of Rs 3,500 per tonne.
Export of raw sugar at present would lead to a loss of Rs 4,500 per tonne because global prices are ruling lower at Rs 22,500 per tonne as against the production cost of Rs 26,500 per tonne, sources said.
Traders are of the view that an incentive below Rs 3,500 per tonne is not viable for sugar mills to undertake raw sugar exports at current global prices.
Sugar mills are facing cash crunch as sugar prices have come down below the cost of production in view of surplus availability. They are also saddled with huge cane arrears.
Sources said an incentive of Rs 2,390 per tonne as suggested by the Food Ministry would cost the government around Rs 1,000 crore for two years.
If incentive is raised to Rs 3,500 per tonne, it would cost the exhequer Rs 1,400 crore for export of 40 lakh tonnes in two years, they added.