In a slew of decisions to boost agriculture export, the government on Wednesday decided to free sugar export to help mills clear cane arrears of over Rs 10,000 crore to farmers, and set up an expert panel to formulate a policy to handle surplus foodgrains in view of storage crunch.

In a meeting chaired by Prime Minister Manmohan Singh, the government also decided to scrap the minimum export price of onion, a step that will fetch more income to growers.

"Sugar exports are freed and it is brought under open general license (OGL) scheme. There will be no quantitative restriction and we will stop exports when it touches a particular level," a high-level source said.

The Food Ministry has been following a policy of allotting export quota to mills on average output in the last 3 years. The Centre has allowed 2 million tonnes of exports this year.

The meeting follows Agriculture Minister Sharad Pawar's letter to Singh raising objections to the government policies on farm commodities such as sugar, cotton and milk products.

Coming under pressure from Pawar and Congress party, the government earlier this week had allowed cotton exports without any quantitative cap and lifted ban on casein exports.

Besides Pawar, Finance Minister Pranab Mukherjee, Food Minister K V Thomas, Commerce Minister Anand Sharma, PMEAC Chairman C Rangarajan and Planning Commission Deputy Chairman Montek Singh Ahluwalia attended today's meeting.

Apprehending that storage crunch would damage foodgrain during monsoon season, it was also decided to set up a panel, headed by Rangarajan, to recommend ways to handle surplus foodgrains stock lying in the central pool.

The committee, comprising officials from Agriculture, Commerce, Food and Finance Ministries, has been asked to submit its recommendation in a shortest span as possible.

The country is estimated to have produced a record 103.41 million tonnes of rice and 90.23 million tonnes of wheat in the 2011-12 crop year (July-June).

The committee will look into the Food Ministry's proposal to distribute 14.5 million tonnes of foodgrains to ration card holders, besides recommending export grain policy, sources said.

At present, the government has storage capacity of 63 million tonnes. As of April 1, the FCI had stock of 53 million tonnes and this inventory is expected to 75 million tonnes by June as the country is set to harvest record wheat production.

Punjab, Haryana and Madhya Pradesh are expected to face severe strain on their storage requirement.

On sugar, sources said that the government has decided to do way with export permits (release order) from the Food Ministry for expediting shipments.

The decision to put sugar export under OGL would also be applicable on one million tonnes of shipments permitted by the EGoM on March 26. India is estimated to produce 26 million tonnes of sugar in 2011-12 marketing year (October-September) as against the annual domestic demand of 22 million tonnes.

Hailing the decision to put sugar exports under OGL, Indian Sugar Mills Association (ISMA) Director General Abinash Verma said that the exports would now be faster, which would help millers to pay cane arrears of about Rs 10,000 crore as quickly as possible.

On onion front, the government would would review the situation after every two months to ensure that domestic markets remain unaffected by this step. At present, onion is selling at Rs 10-12 a kg in retail markets in Delhi.

Due to high export price of onions, India had lost its competitive edge in international onion markets to China and Egypt. Earlier in February this year, the government had lowered minimum export price (MEP) of all varieties of onions, except Bangalore Rose onions and Krishnapuram onions to USD 125 per tonne.

India's onion production is estimated at 151.36 lakh tonnes in 2011-12 (July-June), which is higher than the previous year's output of 145.62 lakh tonnes.