Inter-ministerial team to explore sugar barter proposal

Officials from the ministries of food, external affairs and commerce will visit Indonesia, Sri Lanka, Bangladesh and Egypt in the next few days to explore the possibility of exporting sugar through a system of barter with these countries.

For example, India imports palm oil from Indonesia, areca nuts, pepper, cloves and nutmeg from Sri Lanka and betel nuts, sesame oil and fish from Bangladesh. India would explore the possibility of exporting sugar in lieu of imports.

“The team is expected to start its tour from Indonesia,” said a senior official.

India’s total agricultural imports were provisionally estimated to be Rs 105,149 crore in 2013-14, while exports were pegged at Rs 268,469.05 crore.

In the past six years, government-set prices have soared by 70 per cent, but sugar prices have slumped to Rs 2,200 ($34) a tonne, against an average cost of production of Rs 3,100 a tonne.

Experts say higher cane price is the main reason for the surplus, which has helped avoid sharp output swings like in 2008-09 when India had to import 4.3 million tonnes after exporting five million tonnes a year earlier, pushing benchmark New York prices to a 30-year high.

Despite an export incentive of Rs 4,000 a tonne, India’s overseas sales are expected to be only 800,000 tonnes in the 2014-15 season against 2.2 million tonnes in the previous year.

The sugar sector owes Rs 14,398 crore to cane farmers, but is unable to pay owing to severe liquidity crunch on account of surplus production, which has resulted in low prices of sugar in the domestic markets.

Sugar production of India, the world's second largest producer and biggest consumer, has been more than the country's demand for the past five years.

Sugar output is estimated at a record 28.3 million tonnes in 2014-15 marketing year (October-September), against 24.3 million tonnes in the previous year, while the total annual demand is pegged at 24.5 million tonnes.