Sugar exports sop to stay for 1 more year

The Union government may extend export sops to the ailing sugar industry by one year.

"We feel that unless we liquidate the stocks amply available, we will be not be able to improve the position of farmers and sugar mills. Export will make things better," Union Agriculture Minister Sharad Pawar said on the sidelines of a FICCI conference on agriculture. "We will take a decision soon.''

The export subsidy of Rs 1,350 (for coastal mills) and Rs 1,450 a tonne (for non-coastal mills) is currently valid till April 18, 2008. The government has also created a buffer stock of 5 million tonnes to bail out the industry.

Indian sugar mills have contracted exports of 1.8 million tonnes since the government ended a six-month ban on export in January. Mills have also signed contracts to sell about 500,000 tonnes of raw sugar.

"Though the rupee appreciation has impacted export realisation, we have no option but to export so that the domestic prices improve," said a sugar miller.

The sugar industry is facing its worst crisis where mills are not even able to recover the cost of sugarcane. This year's production at 28 million tonnes is 45 per cent higher than last year's 19.2 million tonnes.

Consequently, sugar prices have crashed and most companies have seen a loss in the past two quarters. Most sugar stocks are trading at an all-time low. Mills have not been able to pay the cane prices to farmers.

And the worst is yet to come. Prices are expected to fall further with yet another record production, projected at over 30 million tonnes for the 2007-08. Annual domestic demand is hovering around 20 million tonnes.

Bloomberg adds:
Shipments from India in the year starting October may more than double to 2.5 million tonnes, making the country the biggest exporter after Thailand and Australia, US Foreign Agricultural Service said in May.

Bajaj Hindusthan and Balrampur Chini Mills, the country's biggest producers, rose for a second day. Bajaj added as much as 4 per cent to Rs 184.2, while Balrampur Chini rose as much as 7.4 per cent to Rs 89.2.

Yesterday, the companies had their biggest one-day gain after sugar prices jumped the most since 1989 and the government announced incentives.