The government on Wednesday approved a subsidy of Rs 3,500 crore to sugar mills for the export of 60 lakh tonnes of the sweetener during the ongoing marketing year 2020-21 as part of its efforts to help them clear outstanding dues to sugarcane farmers.

Briefing the media after the meeting, information and broadcasting minister Prakash Javadekar said the Cabinet Committee on Economic Affairs (CCEA) has approved the subsidy at the rate of Rs 6 per kg for the current year, much lower than about Rs 10.50 per kg in the 2019-20 marketing year keeping in view the favourable international prices.

Javadekar said both the “sugar industry as well as the sugarcane farmers are in crisis” because of high domestic production in the last two-three years. This year too production is expected to be 310 lakh tonnes against the annual demand of 260 lakh tonnes.

The allocation of Rs 3,500 crore for exports of 6 million tonnes translates into a subsidy of Rs 5,833 per tonne, which is lower than the industry’s expectation of Rs 8,000 crore and last year’s subsidy of Rs 10,448 crore. The subsidy helped India export a record 5.7 million tonnes of sugar in the 2019-20 season, which ended in September.

Despite the lower subsidy, India could export 6 million tonnes of sugar as prices have risen in the world market, said Abinash Verma, the director-general of the Indian Sugar Mills Association.

“The drop in sugar production from Thailand gives an opportunity for India to export to their traditional markets like Indonesia and Malaysia,” Verma said.

Sugar output in Thailand, the world’s second-largest exporter after Brazil, is expected to fall to the lowest level in a decade as drought hit cane plantation.