After months of delay, the Cabinet Committee on Economic Affairs on Thursday cleared a proposal to extend a subsidy of Rs 4,000 a tonne on export of 1.4 million tonnes of raw sugar in the 2014-15 crop year (which began last October and runs till end-September this year).
This is expected to help millers export a portion of surplus production and “will help sugar mills to clear the cane price dues of farmers”, went an official statement after the meeting.
It said for mills with distillery facilities, the incentive applies only if they offer to supply a fourth of their annual alcohol production (a byproduct) as ethanol for the ongoing petrol-blending programme of oil marketing companies.
In Maharashtra, the country’s biggest sugar producing state, of the 100-odd cooperative mills, around 40 have ethanol manufacturing facilities. Of the remaining 400-odd private mills, almost all the big ones do.
The incentive might not directly benefit Uttar Pradesh sugar mills (the next biggest producing state), except for helping to absorb the surplus and improving market sentiment. Sugarcane payment arrears in UP are expected to cross Rs 8,000 crore by March.
Abhinash Verma, director-general of the Indian Sugar Mills Association, said at the current global and domestic prices, raw sugar export from India would be just about viable with the incentives. Isma says there is a surplus of around 2.5 mt and the industry will require incentives for another 1.0-1.5 mt.
“This is the only way forward for the industry to pay the cane price (set by governments and too high, says the industry). Else, the arrears which are at Rs 12,300 crore will very soon cross the Rs 13,000 crore recorded last season,” Verma said.
|OTHER CABINET DECISIONS|
Factories in Maharashtra and UP says they’ve been selling sugar 25-30 per cent below their cost of output. Prices in these states have fallen to the season’s lowest of Rs 23 a kg and Rs 26.5 a kg (ex-factory). The current cost of sugar production is Rs 34 a kg in Maharashtra and Rs 34.5 a kg in UP, says Isma.
Sugar production in the 2014-15 season is estimated to be 25.5-26 mt, up from 24.5 mt last year. Consumption is estimated at 24.8-25 mt, leaving a net surplus of 0.7-1 mt.