Govt may scrap sugar export sops

Decision likely after criticism from major producers, including Brazil.

The government may end the subsidy for sugar exporters after a domestic glut of the sweetener is absorbed.

"It is a temporary measure,'' Food Secretary T Nanda Kumar said at a conference in Dubai on Monday. "We will review it after addressing the surplus.''

India in March announced a freight subsidy of as much as Rs 1,450 ($37) a tonne to reduce stockpiles after production reached a record. The incentive, valid for a year, prompted some producers including Australia to raise the issue with the World Trade Organisation.

"It's a pity that India is subsidising exports after having fought the European Union to bring down tariffs,'' Marcos Jank, president of the United Sugarcane Industry Union, known as Unica, said at the conference.

"India must consider policy reform, discontinue the export subsidy and divert such intervention in promoting ethanol and bio-electricity.''

The group represents sugarcane growers in Brazil's south-central region, where 60 per cent of the nation's crop is grown.

India's production may total 27 million tonnes in the year ending September 30, SL Jain, director general of the producers' group, said in an interview in Dubai yesterday. That's one million tonnes more than what the government forecast in December and compares with last year's 28.3 million tonnes.

The South Asian country may export at least 3 million tonnes of sugar in the year to September 30, he said. Mills have sold 2.2 million tonnes, including 1.4 million tonnes of raw sugar, since October 1, Jain said. India may ship as much as 3 million tonnes annually until 2010, according to the International Sugar Organisation.

"The subsidy is meant to help sugar cane farmers, not capture the global market,'' Nanda Kumar said.

Some of the country's 50 million sugarcane growers may shift to other crops including cereals in the next two years because of a drop in prices of the sweetener, he said.

Sugar was the fourth-worst performer last year in the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities, declining 7.9 per cent. Wheat surged 77 per cent in 2007, reaching a record $10.095 on December 17.