The sugar industry is widely anticipating an announcement on a mandatory export policy from the government to replace the existing export subsidy scheme in the new crushing season beginning October 1, while officials say they are evaluating several options to deal with the excess sugar, the result of successive years of record surpluses.
Industry sources told ET that the central government will "very shortly" announce the mandatory sugar export policy . The central government had announced a subsidy of Rs 4,000 a tonne last year for export of raw sugar as the pressure of excess sugar production in the last five years had pulled down prices, and affected the capacity of mills to pay farmers for cane.
But the country could export only 1 million tonnes of sugar in this production year, even as output is expected to surge to record levels for the sixth consecutive year. Officials in the food ministry said there were a number of proposals to help the sugar industry and farmers, before the sugar crushing season began.
"We don't want to spread speculations on if we will be giving quotas to companies for mandatory export sugar or if we will give further any subsidy on export," a food ministry official said. "In the regulated regime prior to 2013, there was a Sugar Export Promotion Act and quotas were allocated. So it is not something bizarre if we now do it again. Let it happen and when it gets notified, we will talk."
If the central government accepts a mandatory sugar export policy, then there will be no export subsidy , as it will not be compatible with World Trade Organization rules. Without export subsidy , based on the current international rates, sugar mills can get an ex-mill price of Rs 17 a kg for raw sugar.
Based on current price, this means they will have to bear a loss of about Rs 6 per kg on the sugar they export. A large number of sugar mills don't see any problem in absorbing this loss. "We used to sell 10 per cent sugar as levy sugar at lower than the market price. The mandatory export will be just like the levy mechanism. But this will help to get rid of the excess sugar, which is our biggest concern," said the managing director of a sugar cooperative from western Maharashtra.
Narendra Murkumbi, vice chairman and managing director of Shree Renuka SugarsBSE -1.34 %, said mandatory exports will be tough to implement."In principle, mandatory export of sugar is a good idea. The 3-4 million tonne surplus sugar in the country is driving down prices, and any solution that helps to take care of the surplus is good. But implementing it will be a challenge," he said adding: "Continuing export subsidy is the right solution to take care the short-term problem of surplus sugar."
Echoing the industry's demand about cane price, Murkumbi said: "Right now, sugar mills do not have the capacity to do another season.We need help to bridge the gap between the FRP (fair and remunerative price for cane) and what the mills can pay the farmers."
The food ministry official said the government is working to help export Indian sugar to Indonesia, Malaysia and Sri Lanka. "Indonesia is a very significant market in the Southeast Asian region, consuming over 3 million tonnes of the sweetener. Thailand has an advantage over India as they get to export sugar at 5 per cent and we attract a duty of 15 per cent. We are trying to work with them under the Regional Cooperation for Economic Partnership," he said.
Source:- economictimes.indiatimes.com
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