An export target of 3-4 million tonnes of sugar is projected this year in order to stabilise sugar prices in the domestic market. For this to happen, subsidy is urgent

Moneylife recently covered the sugar industry, where it was pointed out that with the enormous and surplus stock of over 8.5 million tonnes of sugar, it is essential to effect exports urgently, since the new crop crushing season has just started.

Global production of sugar for 2013-14, as per Food and Agricultural

Organisation (FAO) is estimated to be around 180 million tonnes, almost

15% of which is India's output.

Meantime, the sugar prices have fluctuated from 17.4 cents to 19.31 cents per pound with the October price at around 18.7 cents. Out of Indian production of about 25.6 million tonnes, the industry feels that they may be able to export 2 million tonnes. Contracts for exports have been made for about 500,000 tonnes from Maharashtra so far.

There is already a carry over balance of 8.5 million tonnes of sugar from the last season and the new crop harvesting and crushing has already started in some areas, where growers have been demanding higher cane prices, citing increased input costs.

Karnataka, which was the first to set up Sugarcane Control Board, has finally fixed a price of Rs2,500 per tonne, as against Rs2,400 last year, whereas the demand from growers has been for Rs2,600. The growers have reiterated the problems of increased input costs, transportation charges etc. A revision may be possible later, should the situation warrant, according to the Board.

Retail prices of sugar in the domestic market has averaged now Rs31 per kilo, and unless the existing stocks are disposed off by export, millers feel that incoming stocks will push the prices down further and they would not have space to keep them too.

The FAO has projected unfavourable weather conditions in South America, particularly for Brazil, the world's largest sugar producer. Hence it is felt that there are fair chances that sugar prices would pick up in the near term.

According to Abinash Verma, director general of Indian Sugar Mills Association, millers would welcome an export subsidy to facilitate exports, enabling shipments of 3-4 million tonnes this year. Verma recalls that in 2006-07, in order to encourage export of 6 million tonnes of sugar, a subsidy of Rs1,350 to Rs1,450 was given. Interest free loans were given in 2007-08 to millers. A similar move in the above lines would enable them to perform better this year, but they need this support urgently.

Indian exporters face serious challenge from both Pakistan and Thailand in the export of sugar and it is therefore, imperative that the government takes immediate steps to resolve the export problem this year and help the industry to overcome the present impasse.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)