Union Food Secretary Sudhir Kumar has said the Centre will take a call on extending export incentive for raw sugar soon.
The matter has been under examination for weeks with the industry reiterating the need for extension in view of sliding prices amidst rising production costs and excess supply.
The incentive was approved by the Centre for the 2013-14 and 2014-15 seasons (October-September) and had been in place till September. The scheme, reviewed every two months, provided a subsidy between Rs. 2,277 and Rs. 3,371 for a tonne of raw sugar. Around 7,00,000 tonnes of raw sugar have been shipped under the scheme last season.
“Our assessment of the present stock and the production estimate for the year took some time. Now that there is clarity and we’re heading in the right direction, there will be a decision,” said Kumar on Thursday at the 80th Annual General Meeting of the Indian Sugar Mills Association.
He said that the Government estimated the 2014-15 season opening stock at 72 lakh tonnes (lt) and had pegged ending stock at 74 lt.
Brazilian sugar
Industry officials, however, are worried that the Government might have made its move a little late. With global crude oil prices falling, some feel, Brazil –world’s largest sugar producer– could produce more sugar instead of ethanol.
“On the international front, due to the steep fall in crude oil prices, there is possibility that there could be a shift from ethanol to sugar production. With the Brazilian real falling, the price of Brazilian sugar will be cheap that it will threaten to come into India and despite the import duty, it will be cheaper than Indian sugar,” said A Vellayan, Executive Chairman of the Murugappa Group that runs EID-Parry.
Vellayan, who took over as President of ISMA on Thursday, said that domestic mills are being forced to sell to international traders in forward markets at cheaper prices to generate cash flow.
“They are selling February-March’s product today to be able to pay farmers. Exports have not yet started and banks are hardly lending to mills. It is an unviable situation,” he said.
“We don’t see oil prices rising for another 6-8 months during which time Brazil will have a new crop.
“So with a decline in oil prices, it’s a possibility that more cane will go into sugar and less into ethanol,” said Tarun Sawhney, Vice-Chairman and Managing Director, Triveni Engineering & Industries Ltd.