Output likely to increase 35%

The sugar output in the current marketing season ended September is estimated at 26 million tonne, up by a whopping 35% from the last year, S.L. Jain, director general, Indian Sugar Mills Association, said today.

"Next year (2007-08), the output could be at least 1 million tonne higher, at over 27 million tonne," Jain told NewsWire18 on the sidelines of Sugar Summit 2007 here. The government estimates sugar output for the current season at 25 million tonne.

However, despite the higher output, sugar exports in the current season are seen at 1 million tonne because of weak international prices, Jain said.

"By the time the ban on sugar exports was lifted, the international prices had fallen, making exports less lucrative," he added.

Last year, India had exported around 1.1-1.2 million tonne of sugar.

While the industry officials expect exports of around 2-3 million tonne in the current year, the government is still targeting exports worth 2.5 million tonne.

Jain said India has already exported 4,00,000 tonne sugar since the ban was lifted in January.

The government had banned sugar exports last June to increase the domestic supply, control prices and tame inflationary pressures. The global sugar prices were then at a multi-year high of over $500 a tonne, and have now eased to $317-331 a tonne.

Jain also expects sops from the Centre to boost sugar exports in the coming days. "However, if the sops are not notified soon, exports would become a serious challenge," Jain noted.

In an effort to bail out the sugar industry, which is reeling under bumper crop estimates, subdued demand and falling prices, the Cabinet Committee on Economic Affairs last month decided to provide subsidy on sugar exports.

A subsidy of Rs 1,350 a tonne has been "tentatively" fixed for mills in the coastal areas, while for those in the non-coastal regions, it has been fixed at Rs 1,450 a tonne. The subsidy package is estimated at Rs 8.5 billion.

However, the has not been officially notified on account of the model code of conduct in force in Uttar Pradesh, a major producer of sugar. The subsidy package has been referred to the Election Commission for its approval.

Indian sugar mills have been targeting countries such as Colombo, Bangladesh, West Asia, Yemen and Africa for exports, Jain said.

"We are looking at countries where we have freight advantage compared with Brazil and Thailand," he added.

Jain pegged the sugar stock for 2006-07 at 6 million tonne, while for 2007-08, it is seen at 10 million tonne.