Centre mulls issues in sugar brew

Sugar production is expected to be 25.5 million tonnes for 2014-15, about four per cent more than last year's

The prime minister's office (PMO), in consultation with the food ministry, is working on sorting some of the contentious issues which repeatedly plunge the sugar sector into a crisis.

The idea is to resolve the issue of extending the raw sugar export incentive and ethanol blending programme to ensure equitable benefits to all the stakeholders - millers, consumers and farmers.

Officials said ensuring 10 per cent ethanol blending and the export incentive on raw sugar have figured prominently in the discussion between the ministry and PMO in recent days.

"There has to be a clear stand on all things possible, which is being worked out," a senior official said. The previous government had announced an export incentive on raw sugar at Rs 3,371 a tonne, which expired in September (the sugar year ends in September). Since then, the new government has not extended it, saying mills have to clear all their accrued dues to farmers before any package can be announced. However, sugar supply is seen as adequate. Production is expected to be 25.5 million tonnes for 2014-15, about four per cent more than last year's. Adding an opening stock of around seven mt, the supply should cross 32 mt.

This could prompt the government to have a rethink on the raw export subsidy. India shipped 1.2 mt of raw sugar in the year ended September, including 700,000 tonnes with export incentives.

The official said the government might extend the export incentive for October and November only after being fully satisfied that this would not have an impact on prices and that mills had fulfilled all their commitments. Annual domestic consumption is 22-24 mt.

According to officials in the know, ensuring a 10 per cent ethanol blending programme, which has failed to re-start despite repeated attempts by the previous government, is also being discussed. Some days earlier, some oil marketing companies had invited tenders for purchase of ethanol but all bids were later cancelled. Ethanol, a by-product of sugarcane, can help reduce India's annual crude oil import bill when blended with petrol and also provide a fixed source of revenue for mills.

Some officials said much of the major policy initiatives as laid down by a committee under the chairmanship of C Rangarajan, former head of the prime minister's economic advisory council, have already been or are being implemented. The sugarcane pricing issue is within states' purview.

Sugar mills in the country's second largest producing state, Uttar Pradesh, had delayed their crushing for a second year in a row in 2014-15, due to mounting cane payment arrears to farmers.

With the state government deciding against increasing the purchase price beyond Rs 280 a quintal for a second year, there is hope that crushing might start in the next few weeks.