The Department of Food has forwarded a cabinet note seeking an extension of raw sugar subsidy only for this current sugar season.

According to officials, it may be included in agenda for the cabinet meeting this week. As per the proposal, a total quantity of 14 lakh metric tonnne (MT) of raw sugar export has been sought for the current season. A subsidy to the tune of RS 4,000 per MT will be given for facilitating this export, as per the proposal.

Officials said the sugar industry has a massive surplus stock of around 14 lakh MT and is expected to go up by another 5-10 lakh MT due to surplus production in Maharashtra.

As per the industry figures, the opening stock on October 1, 2014, was at 7.5 million tonnes — one of the highest ever recorded by the industry. In Maharashtra, the major sugar producing State, the commodity is priced at Rs 2,450 a quintal against the cost of production of Rs 3,000 a quintal while in Uttar Pradesh, the ex-mill price is at Rs 2,750 (cost of production Rs 3,500 a quintal). Under the sugar subsidy scheme introduced in February, 2014, raw sugar exports up to 40 lakh tonnes received a subsidy of Rs 3,300 a tonne. Valid for two months, this was last revised to Rs 3,371 a tonne for the August-September, 2014, period.

India exported seven lakh tonnes of raw sugar in the marketing year ending October 2014. Meanwhile, the marginal 4.54% increase in the Fair and Remunerative Price (FRP) of sugarcane as decided by the cabinet for the 2015-16 crushing season that will start in October this year has left both farmers and mill owners worrisome.

Reportedly, the FRP comes against the backdrop of a bitter struggle between sugar millers and farmers on one hand and the state government on the other over pricing of cane in view of falling price of sugar, particularly in India's second biggest sugar producing state of Uttar Pradesh. It has raised questions over the methodology adopted by the government to determine the so-called ‘fair price’ of sugarcane.

For the 2014-15 season, the SAP in Uttar Pradesh is around Rs 280 per quintal, while the Union government-fixed FRP is Rs 220 per quintal.

However, for the 500-odd sugar mills, which include about 290 in the private sector, paying a low FRP in the coming season itself is expected to be a challenge because of a drop in realisation from sugar and high cane price fixed by some state governments. In the 2014-15 season, the mills owned farmers around Rs 12,500 crore as on April 1, 2014, which had subsequently been brought down to around Rs 1,000 crore by September 31, 2014. However, mills say that unless a reasonable price of sugarcane is fixed or there is a sharp upward jump in sugar prices, the arrears would again mount to the 2014 levels by April this year.