To help the cash-starved industry to pay arrears to sugarcane farmers, the previous government had in February started a scheme to give a subsidy for export of raw sugar up to 4 million tonnes during 2013-14 and 2014-15 marketing years (October-September).
"In a meeting with group of ministers last month, it was decided to suspend the sugar export incentive scheme by September 2014 as it was felt that many mills did not benefit from it. A CCEA note has been moved in this regard," a senior Food Ministry official told PTI.
Although sugarcane arrears are highest at Rs 7,200 crore in Uttar Pradesh, mills in the state have not benefited from the scheme, the official said.
Many mills have not shown adequate interest in the scheme as they had exported major quantity of sugar before the launch of the scheme in February, the official added.
Former Food Minister K V Thomas had also recommended that the export subsidy be withdrawn by September 2014 to prevent its benefit to a select few mills.
Under the scheme, the previous government has fixed the subsidy at Rs 3,300 per tonne for February-March and decided to review it every two months. However for April-May, it reduced the subsidy to Rs 2,277 per tonne taking into account the dollar-rupee fluctuation.
The new government had reinstated the export subsidy at Rs 3,300 per tonne for June-July.
The country has exported about 5 lakh tonnes of raw sugar so far availing the benefit of the subsidy, according to the Indian Sugar Mills Association (ISMA).
Sugar production of India, the world's second largest sugar producer and biggest consumer, is expected to be at 23.8 million tonnes in 2013-14, as against 25.1 million tonnes in the last year.