Government is opposed to the proposal to export unprocessed raw materials like sugarcane, according Trade, industry and Cooperatives Minister, Ms Amelia Kyambadde.
The minister told Parliament on Thursday that such a plan would hamper industrial growth.
Ms Kyambadde, who was presenting a statement on issues of excess sugarcane in Busoga Sub-region said Uganda's policy encourages value addition to products produced locally.
She argued that although Busoga sub region has recorded 500,000 tons of excess sugarcane in the last two months, the local sugar millers can process all the mature sugarcane.
Ms Kyambadde said the excess cane supply was caused by the suspension of sugarcane processing by Sugar Corporation of Uganda Limited (SCOUL) and Kakira Sugar Works, to carry out annual routine maintainance of their machinery.
She said that to make matters worse, Mayuge Sugar, Kamuli Sugar and G.M Sugar Ltd factories reported machine breakdowns, which have left farmers mulling the option of exporting their sugarcane to Kenya.
On average, the six sugar milling companies in Busoga have installed capacity of crushing between 1,000 to 7,000 tons of sugarcane daily.
From the 20 licensed companies, about 650 million metric tonnes of sugarcane is milled to produce 600,000 metric tonnes of sugar annually.
However, Ms Kyambadde says that between 2014 and 2018, the factories have been milling about 430 million metric tonnes of sugarcane and producing 410,000 metric tonnes of sugar annually.
She says that since 2014, sugar production has been declining "due to lack of sugarcane supply to the sugar mills amidst increased installed capacities."
According to Ms Kyambadde, both the millers and farmers will make losses because experts recommend that harvested sugarcane must be processed within 36 hours, otherwise, the weight of the sugarcane deteriorates the longer it is unprocessed.
Her statement stems from a proposal by Busoga sugarcane out growers asking government to issue them permits to export sugarcane to sugar millers in neighbouring Kenya.
The outgrowers claim that the low demand from the sugar millers in Uganda could affect the quality of their mature sugarcane.
Bugabula West Member of Parliament (MP), Mr Henry Kibalya and Bunya South MP, Mr Robert Ntende presented the out growers' proposal to the House on Tuesday.
To ensure that the problem of excess sugarcane supply does not arise in future, Ms Kyambadde says the millers shouldn't undertake maintenance at the same time.
However, the Bulamogi County MP, Kenneth Lubogo disagrees that exporting sugarcane will cause scarcity in Uganda.
He argues that the sugar milling factories lack the capacity to crush all the excess cane.
Ms Kyambadde has pledged to present a more comprehensive statement to the House on how the sugar mills will address the issue of excess sugarcane.
On Wednesday, the Chairman of the Uganda Sugar Manufacturers Association, Mr Jim Kabeho downplayed the outcry on low sugar production, saying that the situation will normalise after two weeks when all the six factories in Busoga resume operations.