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India is unlikely to achieve even 1 million tonnes of raw sugar exports, 25% of permissible quantity, under "Marketing and Promotion Scheme (MPS)" due to pruning of subsidy period to seven months from 19 months proposed originally.
The Food Minister under the United Progressive Alliance (UPA) government on February 28 this year accepted sugar industry's demand and proposed subsidy on exports of raw sugar to the tune of Rs 3,333 a tonne until September 2015. It also put a ceiling of four mt export during the period.
The industry appreciated the government's move and said that the proposal would increase cash flow resulting into a turnaround by the Sugar Year 2015-16.
However, the new government has advanced the end of the subsidy period to September this year, 12 months ahead of the original one. Thus, as of the current announcement the subsidy period expires one year ahead of the original proposal of September 2015.
“The industry has exported between 600,000 and 650,000 tonnes of raw sugar so far this year. Since the crushing season has come to an end, there will no fresh production of raw sugar during the rest of the subsidy period, till September. As a natural consequence, there will be no fresh raw sugar export this year. Even if we consider some orders in hand, the overall quantity will not surpass one mt this year,” said Narendra Murkumbi, managing director, Shree Renuka Sugars, one of the country’s top refiners-cum-exporters.
It had been earlier understood that the subsidy period of 19 months (till September 2015) would capture two crushing seasons, in which export could be comfortably reached at four mt
But, Paswan's announcement on Monday dashed hope of the sugar industry of fetching higher realisation from raw sugar exports. Since, refined sugar fetches more costs on cash and carry, raw sugar export was the only option left with sugar mills for a change in their fortunes.
“Sugar mills booked some orders only towards the end of the crushing season and have executed a little over 500,000 tonnes of raw sugar export until now. There will be no fresh export under the (said) scheme (now),” said a senior industry official.
Exports of refined sugar, however, will depend upon viability. According to Ajit Shriram, Deputy Managing Director of DCM Shriram Consolidated Ltd, the opening stocks for the next crushing season beginning October 1 will stand at 7.5 million tonnes.
Meanwhile, India's raw sugar exports subsidy may face a World Trade Organisation (WTO) hurdle due to compatibility of global law.
"The government must have considered all aspects while announcing the incentivizing scheme. And that is the reason why incentives were announced under MPS instead of declaring it directly. If the Food Security Law can be WTO compatible, why not sugar exports incentives?" asked the industry expert.
There has been no uproar from global community since exports incentives were announced. Hence, WTO compatibility issue is the brainchild of a few people who favour global community at the expense of Indian farmers, he added.
