The department of food has notified its decision to lower the subsidy for raw sugar production for April and May by 31% from the March level, evoking a strong reaction from the cash-starved industry that has termed the move against the spirit of a decision by the Cabinet Committee on Economic Affairs (CCEA).
According to the latest notification, mills will get a subsidy of Rs 2,277 per tonne for raw sugar production for April and May, compared with Rs 3,300 per tonne for the last two months. The subsidy is aimed at encouraging exports of the sugar variety and cut the glut in refined sugar in the domestic market.
Earlier this year, the CCEA had decided to offer Rs 3,300 per tonne subsidy initially for two months through March and directed the food ministry to revise the quantum of the subsidy every two months, factoring in only the average exchange rate of the rupee against the dollar prevailing in the last seven days of the previous month. The subsidy of Rs 3,300 per tonne was calculated on the exchange rate of Rs 62.44 against the dollar, while the domestic currency has appreciated to 59.47 as of Tuesday.
Factoring in the appreciation of the rupee, the subsidy quantum for April and May should have been around Rs 3,800 per tonne, industry executives said. “When the rupee has appreciated against the dollar in April and May from the March level, how can the food ministry lower the subsidy level? The food ministry’s decision is against the CCEA decision. Importantly, it should approach the CCEA again if it wants to revise the formula for calculating subsidy already approved by the CCEA,” said Abinash Verma, the director-general of Indian Sugar Mills Association (ISMA). The food ministry hasn’t notified any reason for the cut in the subsidy quantum.
A Vellayan, executive chairman at Murugappa group that owns EID Parry (India), said. “The real issue with this case is it hurts the credibility of India with foreign buyers who have contracted and will be let down. From the moves made it would appear that there is no respect for the decisions taken by the CCEA and any officer can overrule it. Unless this move is reversed, the industry will have no option but to go to the court.”
According to the ISMA, sugar mills are set to lose more than Rs 1,000 a tonne incentive on exports of roughly 4,00,000 tonnes of raw sugar that could be exported in April and May. The mill had finalised their exports rate on the basis of the gazette notification on February 28 and now the reduced subsidy comes as a shock, according to the ISMA.
