North Indian sugar industry wants quota-based export to continue

Differences within the sugar industry, between mills in northern states and those in western/southern states, have come out in the open. Top Uttar Pradesh-based companies like the Birlas, Dwarikesh, Uttam and DCM Shriram, among others, are protesting at a move to do away with the quota system in the latest export approval of one million tonnes of sugar and to instead allow export on a first come, first served basis, that benefits coastal mills.

Senior officials from these companies met food minister K V Thomas on Thursday to press upon him the need to continue with the earlier quota system. They said mills in UP, Uttarakhand, Punjab, Haryana and Bihar find it difficult to export directly due to the distance from the ports. “We told the minister the whole industry should benefit from export through a quota system and it should not be apportioned by a few mills due to their proximity to ports,” said an official.

On Monday, the government decided to permit export of another million tonnes of sugar to help improve the industry's cash flow and reduce sugarcane arrears to farmers. This was in addition to the export of two million tonnes allowed a few months earlier.

However, speculation is rife that the system of factory-wise quotas based on last season's production has been scrapped in the latest export permission. This is a change from the way the export entitlement of two million tonnes was distributed among all mills in the country. Some which could not export due to a location disadvantage sold their quota to exporting mills in Maharashtra and the southern states, after charging a premium of Rs 2,500 to Rs 3,000 per tonne.

In a letter earlier this week to Union food secretary B C Gupta, the chairman of Dwarikesh Sugar, G R Morarka, said, “We are distressed to learn that the existing policy of giving export quota to each of the mills is proposed to be done away with, to allow export on a first come, first served basis. If this happens, it would cause tremendous loss to the units in Bihar, UP, Punjab and Haryana, who are unable to export due to the distance from the ports.”

Said Morarka: “The direct exporters enjoy income-tax benefits and export benefits, in addition to disposal of stock and consequent saving on working capital interest. If they have to share a small amount with other mills, it is hardly of any consequence (for them).”