We have taken decision in the interest of sugarcane farmers, said Prakash Javadekar. (Representational)

The government on Wednesday announced a Rs 6,268 crore subsidy for export of 6 million tonnes of sugar during the next marketing year starting October to offload surplus domestic stock and help mills clear huge sugarcane arrears of around Rs 15,000 crore.

The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, approved the food ministry's proposal in this regard.

"We have taken an important decision in the interest of sugarcane farmers. The cabinet has approved export subsidy for 6 million tonnes for the 2019-20 marketing year (October-September)," Information and Broadcasting Minister Prakash Javadekar told reporters after the cabinet meeting.

A lump-sum export subsidy of Rs 10,448 per tonne will be given to sugar mills during the next marketing year which is estimated to cost the exchequer Rs 6,268 crore, he said.

This will benefit millions of farmers in Uttar Pradesh, Maharashtra and Karnataka as well as other states, he added.

Even in the ongoing marketing year, the Centre is providing a subsidy of around Rs 11,000 per tonne for export of 5 million tonnes of surplus sugar. This doleout has been objected to by other sugar producing nations like Brazil and Australia at the World Trade Organisation (WTO).

In a statement, the government, however, asserted that the export subsidy on sugar is WTO compatible and as per the Agreement on Agriculture (AoA).

The lump-sum export subsidy will be provided to millers to meet expenses on marketing costs including handling, upgrading and other processing costs as well as international and internal transport and freight charges.

The nodal food ministry will later allocate export quota to individual mills.

The subsidy would be directly credited into farmers'' accounts on behalf of mills against cane price dues and subsequent balance, if any, would be credited to mills'' account, the statement said.

It also said the surplus stock would have created a downward pressure on ex-mill sugar prices, affecting liquidity of mills and mounting of cane arrears.

Hailing the decision, National Federation of Co-operative Sugar Factories Ltd Managing Director Prakash P Naiknavare said, "This is a good decision taken at a right time. There is an inventory of 43.5 million tonnes in the country. Unless exports takes place, there is no way out. Now the ball is in the court of the industry how best they utilise this."

He said the export subsidy for the current year was around Rs 11,000 per tonne, which was linked to crushing of sugarcane. However, the export subsidy announced for 2019-20 at Rs 10,448 per tonnes is linked to marketing and other expenses, which is WTO compatible.

Meanwhile, the Indian Sugar Mills Association (ISMA) said the move will not only reduce the surplus sugar inventory next season, but will also give additional cash flows to the tune of around Rs 18,000 crore, including the subsidy amount.

"This will help the mills reduce carrying costs and interest burden as also help them to pay cane price to farmers on time. With an expected global deficit next year of around 4 million tons, the timely announcement of India's export programme... will enable Indian millers to export the 6 million tons," it said in a statement.

India is facing a glut situation in sugar owing to record production during the current 2018-19 and the previous year. In the current year, sugar output is estimated at around 33 million tonnes, as against 32.3 million tonnes in 2017-18.

As a result, the government estimates that opening stock of sugar would be at an all-time high of around 14.2 million tonnes on October 1, 2019, against the normative requirement of around 5 million tonnes.

India's annual domestic demand is 26 million tonnes.