The downward revision comes at a time when arrears to sugarcane farmers stand at a whopping Rs.12,000 crore.

Sugar producers and exporters alike have lodged a strong protest against the “irrational” decision of the Agriculture Ministry to lower the export incentive by 31 per cent. The have termed the move a “contempt of Cabinet.”

The recent government notification on downward revision of incentive for sugar exports, they fear, will have a negative impact on the payment of dues to sugarcane growers.

The downward revision comes at a time when arrears to sugarcane farmers stand at a whopping Rs.12,000 crore.

Stating that the government’s move is without any rationale, they say it has only helped create confusion in the market, and spread a sense of betrayal among the millers.

While urging the government to reverse the decision, the Indian Sugar Mills’ Association (ISMA) has kept the option to move the court wide open.

The Ministry of Agriculture, on Tuesday, said, in a gazette notification, that export subsidy would be fixed at Rs.2,277 a tonne for April and May when compared with the previous levels of Rs.3300.

The industry, however, has pointed to a decision (as specifically approved by the Cabinet Committee) which specifically said that the incentive rate would be recalculated every two months, taking into account the rupee-dollar exchange rate, prevailing seven days prior to the start of the two-month period.

Accordingly, the incentive rate for April and May should have been recalculated as per the exchange rate in the last week of March, 2014. Since the rupee has only appreciated (against the dollar) from Rs.62.44 as on February 12 (CCEA decision date) to around Rs.60.5 in the last week of March, the rate of incentive should have only been increased to Rs.3,800-4,000 levels. Instead, the rate has been reduced to Rs.2,277 a tonne.

The decision has left the industry perplexed. It is clueless as to on what basis and whose authority the rate has been recalculated to lower levels.

Industry points out that the purpose of promoting sugar exports is actually to support the farmers who will get their dues without further delays.

“This notification will defeat that very purpose. We can challenge the decision in the court, but only time and money will be wasted. The Ministry should have respected the Cabinet decision,” said A. Vellayan, Chairman, Murugappa Group.

He felt that the ministry’s move would hurt the credibility of India with foreign buyers.

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