Industry body ISMA, however, said market sentiments should improve with this decision but sugar exports from India continue to remain unviable and sought government's support.
The sugar industry, which owes about Rs 14,000 crore to cane farmers, is unable to make payment as it is facing severe liquidity crunch on account of surplus production that has resulted in low prices of sugar in domestic markets.
"In view of the inventory levels with the sugar industry and to facilitate achievements of financial liquidity and enable industry to achieve long run viability, minimum indicative export quotas (MIEQ) are being specified for 2015-16 season," the Food Ministry said in a circular.
The export quota of 4 million tonnes of all grades of sugar has been fixed for sugar factories for the 2015-16 marketing year (October-September), it added.
The Ministry further said, "The sugar factories should endeavor to undertake the minimum indicative export quotas of sugar as allocated to them failing which they shall be deemed to be violating the directives of the government."
The quota has been fixed by taking into account average sugar production of three years, including the current and last two sugar seasons.
The quotas can be traded among sugar factories on mutually agreeable terms and conditions.
The new sugar factories which would commence production for the first time during 2015-16 marketing year have the option to export minimum export quota up to 12 percent of their estimated sugar production, the Ministry added.
The decision on sugar exports follows representation made by NCP chief and former Agriculture Minister Sharad Pawar on the issue with Prime Minister Narendra Modi this week.
Pawar had made a strong plea to allow export of 4 million tonnes of sugar to help the industry as well as cane growers in the wake of global glut. He had also taken up the issue with Finance Minister Arun Jaitley.

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