Inter-ministerial wrangle puts sugar exporters in a spot

India has emerged as one of the world's leading importers of raw sugar. However, government's export subsidies for the previous two seasons when the country was exporting sugar are still stuck up in an inter-ministerial tussle between the Union food ministry and the finance ministry.

Official sources said that the finance ministry has reservations over subsidy payment to millers.

Finance ministry has contended that reimbursement can only be given to millers, who have actually incurred expenses and that many sugar mills, which exported sugar through trading houses, are not eligible for the government incentive.

Till June 20, 2004, government was providing ocean freight reimbursement along with marketing and handling charges at the rate of Rs 350 and Rs 500 per tonne respectively to sugar mills for export. It was also reimbursing internal transport and freight charges from mill to port.

"Not even a single rupee has been paid so far to sugar mills on account of ocean freight and marketing and handling charges incurred in course of exports even though 210 claims involving Rs 20.8 crore have been put up for approval," a senior government official said.

Most sugar mills do not have the wherewithal to directly undertake exports and hence had sold their produce to trading houses ex-mill or delivered at port.

Since the government had notified transport and handling reimbursements to boost export, the sale price factored in these incentives, which it was presumed would be recovered in due course.

The internal finance department of food ministry has already sanctioned more than 150 claims for reimbursement of ocean freight and handling charges, but the finance ministry is yet to release the money.

Its contention is that since the mills did not incur the claimed expenses, there is no question of reimbursement.

Union food ministry argued that sugar cannot be exported without incurring transportation and handling charges and just because they were paid on millers' behalf by trading houses should not become the reason for denying reimbursements.

The matter has now been referred to the law ministry and its advice sought on handling the issue.

Even traders claim the government incentives were inbuilt in the export deals and the price at which sugar was exported. Many argue that they would not have exported had the provision for transport and handling reimbursements not been available.

For reimbursement of internal transport and freight charges, food ministry has so far received 1,169 claims of which 810 claims worth Rs 78 crore have been approved.

Many claims in this category are also pending due to ex-mill sale of sugar for export. As a result they have not been paid the transport charges from mill to port.

Between 2000 and 2004 India was a net exporter of sugar, using trade to liquidate surplus stocks before a fall in domestic output led to the withdrawal of export incentives.

The country is now a net importer of sugar, purchased duty-free as raws with obligation to export an equivalent quantity in 36 months.