Govt to allow 1 mn tn sugar export initially

The Centre will "soon" lift the ban on sugar exports as major festivals are over and domestic prices have not shown any upward spiral, a senior government official said today.

"We will initially allow only 1 million tonne of exports...The decision to allow more exports will be taken once the output for the current season is known," the official said.

The country had banned sugar exports on June 22 to keep supplies and prices in the country under check.

Around the time when the ban was imposed, India's annual inflation rate, based on Consumer Price Index for Agricultural Labourers, had risen sharply to 7.25 per cent in June from 6.41 per cent a month earlier, primarily because of a sharp increase in prices of food articles, including wheat, pulses, and sugar. The country had imported a little over 1 million tonne of sugar before the ban was imposed.

Government expects 2006-07 (October-September) sugar output to touch a record 22.7 million tonne compared with 19.3 million tonne produced in 2005-06. "We are expecting an additional 1 mln tn of output...The figures have not been finalised as yet," the official said.

India produced a record 22.1 million tonne in 2002-03.

Though the output is likely to be higher than the current estimates, the government is hesitant to allow higher exports as they may push domestic prices higher, he said. Earlier in the month, agriculture minister Sharad Pawar had said the government would review the export ban on sugar immediately after Diwali.

Indian sugar mills are allowed to export sugar under the advance licence scheme, which stipulates mills that import raw sugar must export back the same quantum within 24 months.

The government had about 4 million tonne of sugar in its reserves when the new sugar season began October 1. "This is equivalent to only 2 months' of consumption," the official said adding year-end stocks should ideally stand at 5 million tonne.

"Hence, we are hesitant about allowing higher exports. We want to keep prices in check, and allowing higher exports may pressurise supply and spike prices," he said.

The industry has been clamouring for lifting of the export ban as global sugar prices have been ruling high.

It believes India has the potential to export up to 3 mln tn of sugar.London sugar futures had touched an all-time high of $497 per tonne on July 6. Prices since then have eased but still remain at attractive levels and high enough to allow Indian firms to reap handsome profits on exports.

Friday, London sugar futures for December delivery closed lower by $3 per tonne at $400 per tonne.

However, in India, despite various government interventions like clamping exports, and releasing higher amount of sugar for open market sale every month, retail prices are still ruling as high as Rs 21 per kg, especially in Delhi.