NEW DELHI (Reuters) - India might consider giving cash-strapped sugar companies an incentive to export white, or refined, sugar as long as mills agree to pay the dues they owe to millions of cane growers, Food Minister Ram Vilas Paswan said on Wednesday.
Five straight years of surplus output has hammered local sugar prices, hitting mills' financial health to an extent that they now owe more than $3 billion to cane growers.
Paying off those arrears would help put money in the pockets of farmers who have suffered crop damage due to untimely rains and hail storms, and lost income as a result of falling world commodity prices.
"Farmers have been hit hard by unseasonal rains in the past few weeks. The payment cannot be better timed, as it will help tide them over the crisis," Paswan said.
On Wednesday Prime Minister Narendra Modi agreed to raise farmers' compensation as part of efforts to calm rising anger against his government.
"The government is willing to consider the demand of the industry so that mills' financials do not worsen but we need an assurance that cane arrears to farmers are cleared as early as possible," Paswan told Reuters.
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Mills also complain that higher government-set cane prices have destroyed their profit margins.
"We have to strike a balance to protect farmers' interests and ensure that cane crushing remains viable for mills. I'll separately talk to farmers and mills to ensure that," Paswan said.
Sugar companies owe 192 billion rupees ($3.1 billion) to cane growers, with the top two producing states of Maharashtra and Uttar Pradesh accounting for more than three-fifths of the total arrears.
India already gives a subsidy of 4,000 rupees ($64) a tonne for exports of raw sugar.
Trade Minister Nirmala Sitharaman last month agreed with mills that, despite the raw sugar export subsidy, overseas sales had become uneconomical due to record output in top producers Brazil, India and Thailand.
Output in India, the world's biggest producer behind Brazil, is estimated at 26.5 million tonnes in 2014/15 against 24.4 million in the previous year, according to the food ministry.
Local consumption is estimated at about 24.8 million tonnes, and on Oct. 1, when the new season began, mills' carryover stocks from the previous year totalled 7.5 million tonnes.
($1 = 62.30 rupees)
(Reporting by Mayank Bhardwaj; Editing by Douglas Busvine and Greg Mahlich)