The government on Friday set for sugar mills an export target of 4 million tonnes for the marketing year ending September 2016 in a bid to clear their cane arrears of Rs.14,000 crore to farmers.
"The export quota of four million tonnes (MT) of all grades of sugar has been fixed for sugar factories for 2015-16 marketing year," the food ministry said in a circular here.
"In view of the inventory levels with the sugar industry and to facilitate achievements of financial liquidity and enable industry to achieve long-run viability, minimum indicative export quotas (MIEQ) are being specified for 2015- 16 sugar season from October 1," the circular said.
Sugar production is estimated to be at a record 28.3 million tonnes in 2014-15 marketing year (October-September) while the total annual demand is around 24.5 million tonnes.
Due to surplus sugar production, sugar prices in the country have fallen below Rs.20 per kg, while the current cost of production is over Rs.30 a kg.
"The decision of the government to export 4 million tonnes of sugar fixing individual export quotas for each sugar mill will help reduce most of the surplus sugar, which has been depressing domestic sugar prices," Indian Sugar Mills Association (ISMA) director general Abinash Verma said in a statement here.
"The market sentiments which are down, should improve with this decision and the ex-mill sugar prices which had fallen by Rs.8 to Rs.10 per kilo in last 14 to 16 months, will see some recovery," he added.
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Following a call from Prime Minister Narendra Modi to consider sugar exports, Food and Consumer Affairs Minister Ram Vilas Paswan had said last month that a proposal was under consideration to ship four million tonnes on terms, including barter trade.
"We want to export sugar to those countries where there is a requirement. The industry must take initiative in this regard," Paswan told reporters on the margins of a conference here. "We also want to promote barter. Otherwise, 40 percent import duty will fixed and it will be of no use."
Modi had called for higher ethanol content in petrol and a concerted effort to push exports in a bid to lower the current sugar surplus and protect the interests of farmers to whom factories owe an estimated Rs.15,000 crore in cane arrears.
Besides the arrears to farmers, the meeting came against the backdrop of the Indian Sugar Mills Association (ISMA) estimating sugar output for the sugar season 2014-15 (October to September) at 28.3 million tonnes, another 28 million tonnes in the next season, and a carry over of 10 million tonnes.
As a result, supplies have outstripped demand for the fifth straight year. The annual demand is around 25-26 million tonnes.
To address the issues at hand, the government has extended a soft loan of Rs.6,000 crore for the clearance of arrears, raised the import duty on sugar from 15 to 40 percent, increased the export subsidy to Rs.4,000 per tonne and raised the level of ethanol blending in petrol to 10 percent.
The government also allowed the export of additional 2,095 tonnes of raw sugar to the US under the tariff rate quota, under which imports there attract a relatively lower customs duty. Prior to that, 8,424 tonnes of raw sugar had been notified for export to the US.