Govt asks sugar mills to export speedily to make early payment to farmers

The Central Government has directed sugar mills across the country to export speedily to make an early payment to farmers.

In a statement issued on Sunday Ministry of Consumer Affairs, Food and Public Distribution stated, "At the end of Sugar Season 2022-23, it is expected that most of the sugar mills will be able to sell their products either in the domestic market or in the international market through exports and will clear the cane dues of farmers in time. Thus, the policy has created a WIN-WIN situation for sugar mills in the country."

The statement comes after the government allowed the export of 6 million tonnes of sugar on a quota basis during the sugar season (SS) 2022-23 as another measure to balance the price stability of sugar in the country and the financial positions of sugar mills in the country, based on initial estimates of sugarcane production.

 

"The Directorate General of Foreign Trade (DGFT) has already notified to extend the inclusion of sugar exports under the 'Restricted' category up to October 31, 2023," the ministry said.

According to the official information given by the Department of Food and Public Distribution (DFPD), the Central Government has prioritized the availability of about 275 lakh metric tonnes (LMT) of sugar for domestic consumption, about 50 LMT of sugar for diversion to ethanol production and to have a closing balance of about 60 LMT as on September 30, 2023.

"Balance quantity of sugar produced by sugar mills in the country would be allowed for exports. Since at the beginning of sugar season 2022-23, initial estimates of sugarcane production are available, it has been decided to allow the export of 60 LMT sugar," it said.

The ministry said that the sugarcane production in the country will be reviewed periodically and based on the latest available estimates, the quantity of sugar exports to be allowed could be reconsidered.

During SS 2021-22, India exported 110 LMT of sugar and became the second largest exporter of sugar in the world and earned about Rs 40,000 crore worth of foreign exchange for the country.

"Timely payment and low carrying cost of stocks for sugar mills also resulted in early clearance of cane arrears of farmers," the ministry added.

As on October 31, 2022, more than 96 per cent of cane dues of farmers for SS 2021-22 were already cleared despite record procurement of sugarcane of more than 1.18 lakh crore rupees.

It is worth mentioning that in the sugar export policy for SS 2022-23, the government has announced sugar mill wise export quota for all sugar mills in the country with an objective system based on the average production of sugar mills in the last three years and the average sugar production of the country in last three years.

Further, to expedite the sugar exports and to ensure flexibility to sugar mills in the execution of the export quota, mills may decide to surrender the quota partially or fully within 60 days of the date of issue of the order OR they can swap the export quota with domestic quota within 60 days. This system would ensure a lesser burden on the logistics system of the country as the swapping system would reduce the need to transport the sugar from distant locations to the ports for exports and movement of sugar across the length and breadth of the country for domestic consumption.

It is also notable that swapping would also ensure the liquidation of sugar stocks of all mills as mills which are not able to export could swap their export quota with the domestic quota of sugar mills which are able to export more, mainly due to their vicinity to ports.

"The sugar export policy is an indication of the focus of the government on ensuring price stability in the sugar sector in the interest of domestic consumers. By restricting sugar exports, domestic prices will remain under control and no major inflationary trends will arise in the domestic market. Indian sugar market has already seen a very nominal price increase which is in tune with an increase in the FRP of sugarcane for farmers," it added.

Another focus area is the production of ethanol in the country which is a priority area for the country to reduce dependence on fuel imports and to move towards green energy. Higher ethanol prices for producers have already encouraged distilleries to divert more sugar towards ethanol. The sugar export policy is another mechanism to ensure the availability of sufficient sugarcane/sugar/molasses for ethanol production. Diversion of sugar towards ethanol production during ESY 2022-23 is expected to be 45-50 LMT.

By allowing sugar exports, the government has also protected the interest of cane farmers and sugar mills as mills will be able to take benefits of a favourable international sugar price scenario and achieve better prices of sugar so that cane dues of farmers in the current sugar season 2022-23 may also be paid timely and working capital costs of mills may reduce due to optimum level of sugar stocks with them.

In the last 6 years, the government has taken multiple and timely initiatives in the sugar sector enabling sugar mills to stand on their own and become a self-sufficient sector. During SS 2022-23, sugar mills were not given any subsidy for sugar production/marketing and even in the current season, the sugar sector of the country is expected to perform well with no financial support from the Government of India.

"Facilitating diversion of sugar to ethanol production and export of surplus sugar as per availability, Government of India has taken care of interest of about 5 crore sugarcane farmer families as well as 5 lakh sugar mills workers along with a whole ecosystem of sugar sector including ethanol distilleries taking them on a growth trajectory," it added.