Agriculture Minister Sharad Pawar has sought permission to allow sugar exports immediately, saying this would help the industry pay cane-growers.
In a letter to Finance Minister Pranab Mukherjee, Pawar said: "The estimated sugar production of 24.5 million tonne would now be nearly 25 million tonne, more than the estimated consumption of 22 MT during 2010-11 sugar season.
"Considering committed exports under the advance license scheme (ALS) of 1.2 million tonne, there is still a exportable surplus of 1.3 million tonne in the country," he said.
Since the empowered group of ministers (EGOM) on food is yet discuss and take a decision on allowing sugar exports under the open general licence (OGL), Pawar has pressed the panic button saying any delay would lead to increase in cane arrears and reduction in cane area in the coming years.
Pawar has sought the intervention of the Finance Minister for an early decision on this issue because the window to export sugar from India is available only upto end of April.
At present, the government has kept on hold export of 0.5 million tonnes of sugar under OGL as the Prime Minister has directed the Food Ministry to refer the matter to the EGOM in view of high inflation.
But earlier, it had allowed mills to meet their export obligation (ALS) of nearly 1.2 million tonne by March 2011.
Pawar explained that extension of stock holding limit and substantial surplus sugar has depressed domestic prices below cost of production, thereby leading to mounting cane arrears.
"If sugar prices are not stabilised and cash flow to mills are not improved, I fear that we will end up paying a huge subsidy to clear cane payment arrears of farmers," he noted.
He observed that high cane arrears may lead to reduction in cane area in the coming years. In Uttar Pradesh, cost of sugar production is Rs 2,950 a quintal, while ex-mill price is Rs 2,800 per quintal.
Similarly, in Maharasthra, cost of production is Rs 2750 per quintal, ex-mill price is Rs 2,600 per quintal.
Highlighting the need to permit immediate export of sugar, Pawar said that Brazilian sugar will be entering the market from May, "after which the price differential between Indian and the global sugar would not be conducive to exports".
According to industry body ISMA, sugarcane arrears till December 2010 stood at about Rs 4,000 crore.
