Centre ends sugar export subsidy

The central government has withdrawn the production–linked subsidy of Rs 4.50 a quintal that it transfers directly into the bank account of sugarcane farmers on the condition that the mills to which they sell have exported 80 per cent of their prescribed quota of sugar. The mills also have to produce a certain level of ethanol.

Ex-factory sugar prices have improved significantly in the past year, from Rs 23-24 a kg to a little over Rs 32 a kg. The move, some officials said, also means that mills would be discouraged from exporting, helping maintaining domestic supplies.

Till date, as against a quota of 3.2 million tonnes, mills have managed to export around 1.5 mt.  

Earlier, the government of Maharashtra too had withdrawn an excise duty concession to encourage mills to export sugar from their allocated quota; however, it seems to not have yielded the desired results.

Sugar prices in retail markets have risen by at least 50 per cent in the past few months, despite ample supplies, prompting the Centre to first impose a stockholding limit on retailers and wholesalers, followed by Thursday's decision to withdraw the export incentive.

The direct transfer of incentive into the bank account of millers against mills fulfilling their export and ethanol production obligation would have cost the exchequer Rs 1,147 crore in the entire quota was exported. This was adjusted from the sugar development fund by raising the excise duty on sugar.

A rough calculation shows that assuming the average per hectare cane yield is 700 quintals, each farmer family would have gained slightly more than Rs 2,000 directly from the central government this season.

Sugar production in 2015-16 (October to September) is expected to be around 25.2 mt, 11 per cent less than in 2014-15.