The government’s strategy to incentivise sugar exports to help mills clear cane arrears seems to have backfired, pushing the government now to explore export control measures to check the sweetener’s unrestricted price rise. Close on the heels of withdrawal of export incentives, the government is now planning to check the outflow of sugar by either imposing a levy on its export or by banning overseas sales altogether so that domestic prices do not spike further from the current level. The domestic price of sugar rose to Rs 40 a kg in March from Rs 30 a kg in October last year. The rise was particularly steep after export incentives were introduced in November 2015. The incentives extended at that time was aimed at increasing the income of sugar mills so that they could clear the cane arrears due to farmers. While the strategy helped clear the came arrears, the export sop has now started hitting domestic consumers by way of rising prices and is forcing the government to change tack in just about six months’ time. When the retail price of sugar went up to Rs 45 a kg in Delhi around the third week of April, the government swung into action and imposed stock limits on the commodity after which the retail price now stands stabilised at Rs 40 a kg. “The challenge now before the government is to prevent any further increase in sugar prices. This can be achieved by restricting sugar exports, either by banning it completely or levying an exorbitant duty,” an official said who did not want to be identified. Since the NDA government does not favour a blanket ban, export regulation through a duty is a greater possibility, he said. The government has realised that the sugar stock situation will be tight next year due to fall in production as Maharashtra and Karnataka were hit by two consecutive years of drought. “There will not be any shortage as the country will have ample stocks which will be higher than the annual demand when next year’s production is combined,” the official said. Even if sugar production falls to 23 million tonnes next year (October-September), with carryover stocks of seven million tonnes, the total availability will be about 30 million tonnes, he said. Unless there is no export from now on, the availability of sugar can meet the domestic demand for 14 months. India’s annual sugar consumption is pegged at 26 million tonnes for 2016-17 season. The country has exported 1.6 million tonnes of sugar since the start of the season, official data show. Till May, there was an export subsidy to boost shipments from the country. The government last month withdrew the export incentive to sugar mills after domestic prices of the sweetener rose. In November, the government had announced a subsidy of Rs 1,147 crore to sugar mills by agreeing to pay the amount to sugarcane farmers on behalf of the companies if they export 3.2 million tonnes of the sweetener. The production-linked subsidy of Rs 4.50 per quintal was paid directly to cane farmers during 2015-16 sugar season (October-September) on behalf of the mills on condition that they would export at least 80 per cent of their export quota. The Centre has allotted mill-wise export quota that totals four million tonnes. “The curb on export is logical when there is lower production at home,” the official said and pointed out that similar steps were taken in the case of rice, wheat, onion, tomato and other edibles in the past. He also said that there could be a minimum export price (MEP) for sugar as there was for onion. “The MEP system can work effectively as no sugar can go out of the country if the minimum price is set at a much higher level than global rates,” he said. The government is worried that if export is not restricted in time, the outflow could increase, especially in view of the projection of a global sugar shortage in 2016-17. Currently, there is no duty on sugar exports and it is under open general licence (OGL). The government has already abolished its own powers to control sugar export through release order mechanism, which was the practice until 2014. The total cane arrears are lower at Rs 7,520 crore as of June 7, down from Rs 19,437 crore in the year-ago period. Out of this, sugar mills in Uttar Pradesh have an outstanding of Rs 2,428 crore, the highest among all states. The food ministry has asked the Uttar Pradesh government to ensure that mills clear the payment immediately as sugar prices are higher this year. According to sources in the government, the arrears of more than Rs 2,100 crore are due from five sugar mills in Uttar Pradesh. While the country’s largest sugar producer, Bajaj Hindusthan, has Rs 834 crore cane arrears as of June 7, the Modi group has Rs 319 crore, Mawana Sugars Rs 403 crore, Simbhaoli Sugar Rs 278 crore and Rana Sugar Rs 210 crore.
As per rules, mills need to clear their cane dues within 14 days of buying from farmers. Cane crushing in Uttar Pradesh ended in the first week of May.