No subsidy for advance licence sugar exports

The export subsidy on sugar announced by the Union government last month would not apply to mills exporting sugar under the advance licence (AL) scheme. Further, the subsidy for exports under the open general licence (OGL) would apply only to the exports done on or after April 19, 2007, and up to April 18, 2008, said a government notification.

Under the AL scheme, companies like Renuka Sugar, Dhampur Sugar, Sakthi Sugar, EID Parry and Simbhaoli Sugar among others imported about 2.6 million tonnes of raw sugar at nil duty between 2002-03 and 2004-05 seasons (October-September). However, the companies had an obligation to re-export one tonne of white sugar against every 1.05 tonnes of raw sugar imported within a period of two years. Of the imported quantity, about 1.6 million tonnes have been shipped.

Companies are planning to take up the matter with the food ministry as they incurred huge losses because of the ban on exports imposed in July last year.

"We are not sure as to how much export will take place under the OGL, but the AL exports are certain as companies have an obligation period within which they need to export. The decision of not allowing subsidy to AL exports will lead to a further decline in domestic prices," said Sanjay Tapriya, director (finance) of Simbhaoli Sugar.

The appreciation in rupee has hit sugar exporters further and their realisations are down about 5 per cent.

Export subsidy at a flat rate of Rs 1,350 a tonne will be given to sugar mills in coastal areas and Rs 1,450 a tonne to factories situated in northern states. The decision has been taken with a view to provide some relief to domestic sugar companies that are faced with a production glut and crash in prices.

The sugar production estimate for the 2006-07 season (October-September) has been revised from 23 million tonnes to 26 million tonnes against a consumption of 19 million tonnes. In 2005-06, sugar production was 19.2 million tonnes.

Oversupply and lack of demand have brought sugar prices down by Rs 500-600 a quintal to Rs 1400.