CCEA may review production subsidy to sugar mills on Wednesday

The proposal is to revise the formula to determine the production subsidy taking into account lower cane crushing, sugar production and exports


The government last year had announced a production subsidy to sugar mills in order to address liquidity stress in the sugar industry. Photo: Bloomberg
The government last year had announced a production subsidy to sugar mills in order to address liquidity stress in the sugar industry. Photo: Bloomberg

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) is likely to review production subsidy to sugar mills for 2015-16 season on Wednesday, taking into account lower sugar production and exports.

To address liquidity stress in sugar industry and facilitate timely payment of cane arrears, the centre last year had announced a subsidy of Rs.4.50 per quintal of cane crushed during October 2015-September 2016 season with a condition that mills meet the export quota of four million tonnes and ethanol blending target.

The subsidy scheme has now been discontinued and the government is yet to make payments to mills. “The CCEA meeting is scheduled for Wednesday. The food ministry’s proposal ‘Review of scheme to provide production subsidy to sugar mills’ is on the agenda,” people familiar with the matter said.

The proposal is to revise the formula to determine the production subsidy taking into account lower cane crushing, sugar production and exports in view of drought in parts of Maharasthra and Karnataka.

With the revised formula, the production subsidy outgo to sugar mills would come down to Rs.600 crore as against previously estimated Rs.1,147 crore, people with knowledge of the matter said.

Mills have been able to export 1.6 million tonnes compared with the target of 4 million tonnes for this year as domestic prices improved after the scheme. The scheme was discontinued as sugar rates improved plus domestic production was estimated to be lower at 25.1 million tonnes for 2015-16 season as against 28.3 million tonnes in the previous year.

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