India fails to decide on incentives for raw sugar exports

By Ratnajyoti Dutta

NEW DELHI (Reuters) - India has failed to approve a scheme to promote raw sugar output for export as ministers remained split on Thursday over how best to help mills, trade and government officials said.

Despite sitting on huge stocks of refined, or white, sugar, a global glut has made it difficult for mills in India - the world's second-biggest sugar producer - to export that variety. Indian mills traditionally sell little raw sugar abroad.

A rise in sugar refining capacity in Asia and Africa has now given India an opportunity to export raws.

But a group of ministers, at a meeting on Thursday, ended without agreement on any of three likely incentives to boost output and exports.

The government is considering giving cash to mills that produce and export raw sugar, paying for transporting sugar to ports from mills, and waiving excise or production tax.

"Most likely, the government will decide on one of these measures. Any help from the government will be a drag on its resources. Therefore the delay," said a government source directly involved in the policymaking.

Trade and industry officials believe the government would have to dole out around 1,500-2,400 rupees per tonne to help mills produce raw sugar for export if it agrees on any of the incentives.

Some trade and government officials believe the finance ministry is wary of subsidising mills.

The exact financial burden has not been finalised, Food Minister K.V. Thomas told reporters after the ministers' meeting.

The cabinet, scheduled to meet next week, is likely to take a decision.

A quick decision will help mills to plan and process raws in the next two months when cane crushing starts tapering off, said Abinash Verma, director general of the Indian Sugar Mills Association, a producers' body.

Mills also say higher government-set prices have pushed up production costs, forcing them to seek help. The government last month provided nearly a billion dollars in interest-free loans to mills to help them clear cane growers' dues.

(Additional reporting by Rajendra Jadhav in Mumbai; Writing by Mayank Bhardwaj; Editing by Jo Winterbottom and Dale Hudson)