NEW DELHI – Sugar companies that have already exhausted their export quota for 2018-19 (Oct-Sep) are now asking the government to increase their quota by giving the share from mills that are finding it difficult to export, sources close to the development said.

"The government is thinking on the procedure on how to go about on calculating the subsidy because subsidy is subject to the completion of export quota and on cane crushed per mill, so it's difficult to calculate subsidy for another mill who gets the quota of some other mill," a senior government official said.

The government last year fixed an export target of 5 mln tn sugar and allocated minimum indicative export quota for each mill. To make exports remunerative for sugar mills, the government had offered them a subsidy package of 55.38 bln rupees. The subsidy, however, is given on the quantum of cane crushed to stay within the guidelines of the World Trade Organization.

Mills get a subsidy of 138.8 rupees on each tn of cane crushed and another 1,000-3,000 rupees per tn for transportation of sugar from factory gate to the port for exports. The actual subsidy works out to be 8.32 rupees per kg of sugar exported. Mills can claim subsidy on cane crushed only if they exhaust their entire export quota. 

If the export quota is transferred to another mill, the exporting mill would not be able to claim subsidy, and without the subsidy, exports would be unviable, an industry official said.

"The MIEQ (minimum indicative export quota) allocated is on the cane crushed by individual mills and if government gives extra quota to any mill that has exhausted its full quota, how will it claim the subsidy? This is the main problem to work on…It's very complicated," the official said.

So far, the industry has contracted export of about 3.0 mln tn of sugar, of which 2.4-2.5 mln tn has been shipped out, another government official said.

Around 200 sugar mills have not exported till now.

If government is able to work out a mechanism for allocating extra quota to mills that are willing to export more, only then it would be able to meet the target of exporting 5 mln tn sugar by September. Without this dispensation, exports are unlikely to top 3.5 mln this season, traders said.

The year has been difficult for India's sugar exports as international prices have been much lower than domestic prices. Even with the subsidies being given by the government, mills are barely breaking even on exports.

This year, sugar exports from India assume significance as 2018-19 is likely to be the second consecutive year of surplus production. The government sees India's production at 32.5 mln tn, up from 31.5 mln tn estimated in March.

With carryover stock from this season seen at about 12.42 mln tn, the total supply in 2018-19 is pegged at 44.92 mln tn, way higher than the estimated consumption of 25-26 mln tn.