)
The government is considering options to take out 'surplus' sugar from the domestic market, which could include mandatory export of around four million tonnes and bartering for import of farm items, news agencies reported on Wednesday.
To cover the losses likely to be incurred by mills in export because of a slump in global prices, the Centre might also consider raising the cess on sugar from the existing 24p a kg. A final call is expected to taken by Prime Minister Narendra Modi, who chaired a meeting of the ministries concerned last week.
The PM, officials said, wanted a long-term solution in the interest of farmers. This could include raising the mandatory limit of ethanol blending with petrol to 10 per cent and boosting of export.
Reuters reported unnamed ministry officials as saying the mandatory export rule could be introduced from the start of the next crop year on October 1, to apply only when output was higher than local demand.
However, sources said, any proposal to cover the losses expected by sugar mills in exporting four mt of raw sugar would entail a financial outgo of around Rs 2,000 crore, assuming ex-mill prices do not fall and the international market also remains stable. This estimated outgo does not consider a rise in the cess.
That apart, some officials said, if contracts are signed now, shipments can start only around March. Which would mean that fulfilling the commitment of four mt of export would be a challenge, as the time window is limited.
On the barter proposal, Press Trust of India said the idea was to do so with countries from where India imports agricultural commodities. We are a major importer of edible oils from Indonesia and Malaysia, and of pulses from Canada, Myanmar and Australia.
In the past six years, government-set prices have soared by 70 per cent but sugar prices have slumped to Rs 2,200 a tonne, against an average cost of production of Rs 3,100 a tonne. Experts say the higher cane price is the main reason for the surplus, which has helped avoid sharp output swings, such as when India had to import 4.3 mt in 2008-09 after exporting five mt a year earlier, pushing benchmark New York prices to a 30-year high.
Despite an export incentive of Rs 4,000 a tonne, India's sales are expected to be only 800,000 tonnes in the 2014-15 season against 2.2 mt the previous year.
Mills owe about Rs 14,400 crore to cane farmers, being unable to pay due to a severe shortage of money on account of surplus production, resulting in low home prices of sugar.
India is the world's second largest producer and biggest consumer; production has been more than the country's demand for the past five years.
Sugar output is estimated at a record 28.3 mt in 2014-15 (October-September), as against 24.3 mt the previous year. Dmand is pegged at 24.5 mt.
