Mills await Paswan's stand on sugar export subsidy

The previous UPA government had announced an export subsidy of Rs 3,300 per tonne on raw sugar

Even as the Department of Food and Public Distribution works to resolve the contentious issue of sugarcane pricing for farmers, there is uncertainty regarding the issue of export subsidy on raw sugar, a major initiative to reduce mounting arrears.

A senior official said just weeks before the new government took charge, the department had moved a proposal to suspend the export subsidy from June, owing to slow exports. In the next few days, Food Minister Ram Vilas Paswan is expected to take a decision on the matter. As an alternative, he might aggressively pitch for fast-tracking the ethanol blending programme.

To help millers export excess stocks and clear dues, the United Progressive Alliance (UPA) government had announced export subsidy of Rs 3,300 a tonne on raw sugar. The subsidy was for February and March. For April and May, the government had reduced the subsidy to Rs 2, 277 a tonne, owing to change in dollar-rupee exchange rates. Officials said now, it has been proposed this incentive be withdrawn.

From April 4, sugar prices have been falling in the domestic market. As of now, prices have corrected about seven per cent. On April 4, NCDEX Spot Kolhapur medium grade sugar stood at Rs 33 a kg; now, the price has fallen to Rs 31.8 a kg.

Millers and industry representatives had strongly opposed the cut in export subsidy, saying the conditions on which the subsidy was granted hadn’t changed. According to industry estimates, sugar mills owe about Rs 12,000 crore to farmers. Though the crushing season, which started in October 2013, has almost ended, cash-starved mills are unable to clear arrears, as sugar prices are lower than production costs. “Of the four million tonnes (mt) of raw sugar to be exported, only 400,000 tonnes have been shipped. So, to withdraw the subsidy at this state will be wrong,” said a senior industry official.

Officials said currently, the ex-factory sugar sale price in Maharashtra stood at Rs 28-29 a kg, while the cost of production was Rs 31-32; in Uttar Pradesh, the ex-factory sale price was Rs 31-32 a kg, while the cost of production was Rs 35-36 a kg. To enable millers to clear dues, the UPA government had, last year, approved Rs 6,600 crore of interest-free loans to the sugar sector.

In the 2013-14 marketing year, sugar production in India, the world’s second-largest producer and largest consumer, is estimated to decline four per cent. The country’s annual demand is estimated at 23-23.5 mt.