Clearing sugar stocks to cost govt Rs 800 cr

Projecting a surplus of over 3.3 million tonne of sugar this year, Agriculture Minister Sharad Pawar said the government would have to spend nearly Rs 800 crore on the steps to liquidate excess stocks.

Addressing the meeting of the Parliamentary consultative committee attached to his ministry, Pawar said the sugar output this year would be over 22.7 million tonne, against the last year's 19.3 million tonne and a likely consumption of 18.5 to 19 million tonne.

Besides, there had been a carry-over stock of 4.4 million tonne from the previous season.

Even after taking into account the three months' consumption, around 4.8 million tonne, that was usually kept as buffer, the surplus at the end of the year would be around 3.3 million tonne, the minister said. This surplus needed to be disposed of to enable sugar mills to pay cane prices to farmers.

Pawar said sugar was the most controlled sector. There were curbs on the sale of sugar in domestic as well as export markets. Besides, there were levy obligations and restrictions on setting up new sugar factories in the 15 km radius of old mills. Our sugar policies needed to change in tune with the changing world economy.

One of the members of the consultative committee suggested that the government should have a long-term sugar policy instead of taking short-term and ad hoc policy decisions. He also advised against banning forward trading in sugar though the flaws in this mode of marketing needed to be removed.

Responding to these remarks, the minister indicated that he could convene a meeting of the Members of Parliament to remove their misgivings concerning futures trading.

There were no plans to subsidise sugar exports and the government was considering building a buffer stock to ease the pressure on mills from the falling prices, Pawar said.

"We feel the benefits of export subsidy will not come to the benefit of the domestic industry, as international prices will come down," Pawar added. "We are giving serious thoughts to create a buffer. This will go to the Cabinet in the next 15 days," he said.

Sitting on a huge surplus and faced with softening domestic and international prices, sugar mills have been urging the government for transport and freight subsidies to make exports viable.

Sugar prices have fallen in the last six months to about $300 a tonne from $400, making exports unprofitable. India banned sugar exports in August when global prices were high and lifted the restriction in January when prices fell sharply.

Pawar said the ministry is examining the proposals from the industry, which wants the government to maintain a buffer and release stocks when required or have mills hold the stocks with the funds from the government.

Pawar attributed a rise in prices of some commodities such as pulses and wheat to a demand-supply mismatch rather than trading in the commodities derivatives.

"Yes, we have received a proposal to ban futures trade. But the price rise has been due to growing economy, increased money supply and demand-supply mismatch," Pawar said.

"If somebody is exploiting the system, we have to see how corrective steps are taken," he said, but was non-committal on whether government will ban trading.