NEW DELHI: The Centre on Monday sought the clearance of the Election Commission, in view of the coming Assembly elections in Uttar Pradesh, for issuing a notification on the creation of a 20-lakh-tonne buffer with the sugar industry for a year and providing export subsidy to millers.

The total subsidy is estimated at about Rs. 1500 crore but it has been made incumbent on the millers to clear the estimated sugarcane arrears of Rs. 1200 crore against it. In 2002-03 too the Government created a buffer stock of 10 lakh tonnes with the industry.

The Union Cabinet Committee on Economic Affairs (CCEA) on Saturday cleared the proposal of the Union Food Ministry to create the buffer and also to give incentive to the millers for export. The decision is motivated by an estimated 250 lakh tonnes of sugar production this year, against 193 lakh tonnes last year and a likely consequential `glut.'

Sources said it was on the direction of Prime Minister Manmohan Singh, who chaired the CCEA meeting, that Food Minister Sharad Pawar sought to seek clearance.

The Government would give a subsidy of about Rs. 400 crore on carrying costs and reimburse another approximate Rs. 400 crore on margin money, interest and insurance on borrowing from banks. The buffer would be allocated to the mills on pro rata basis linked to the stocks held by them.

The Government will give an export incentive of Rs. 1,350 a tonne for sugar factories located in southern States and Rs. 1,450 a tonne for those in the northern States. Mr. Pawar had been seeking permission to do this for the last several months when the price ruled high in the international market, but the Government held back owing to the high price in the domestic market.

The decision is expected to help stabilise the sugar price and liquidate excess stocks. The price bounced back to $ 345 a tonne in the international market but was still lower than around $ 450 a tonne last year when the government had banned export due to the high domestic price and lower output.

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