New Delhi: The Cabinet Committee on Economic Affairs chaired by Prime Minister Narendra Modi on Wednesday decided to extend production subsidy to sugar mills to achieve expected performance in respect of export of sugar and supply of ethanol.

“This has been done to offset cost of cane and facilitate timely payment of cane price dues of farmers,” an official release said.

Due to drought situation, there has been significant decline in sugarcane/sugar production in the country, it said adding drought affected states had requested to reduce the target of sugar export and ethanol supply due to non-availability of sufficient sugarcane and molasses.

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“Similarly, mill/distillery-wise ethanol supply target will be revised to actual quantity contracted by them for supply to Oil Marketing Companies (OMCs),” the release said.

Officials pointed out that production subsidy at Rs 4.50 per quintal of cane crushed during the sugar season 2015-16 was also provided to offset the cost of cane; contingent on mills performance in respect of export quota and ethanol blending targets.

It was also observed that sugar prices were ruling substantially higher than levels required for operational viability of the sugar industry and accordingly production subsidy scheme was withdrawn in May, sources said.

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