To help raise domestic sugar prices, various proposals, including compulsory exports by sugar mills up to 4 million tonnes (mt), at the start of the new sugar season on October 1 and a 6 per cent ethanol blending target, have been suggested by the Food Ministry at a meeting with Prime Minister Narendra Modi on August 1.

On the anvil Export models being considered include government countertrade and direct selling by Indian mills abroad. Countertrade refers to barter i.e., the exchange of goods for trade instead of money.

“There is nothing concrete at the moment, these were proposals discussed with the Prime Minister last Saturday. One was the compulsory exports by mills through either countertrade with other governments from whom we import agri-goods, or by having mills sell directly to foreign traders,” a senior government official told BusinessLine on Wednesday. “Another proposal was to increase ethanol blending to 6 per cent this year and to 10 per cent over the next four to five years,” he said, adding that the models were being explored and a final call will be taken with the Prime Minister’s assent soon.

Prices may gain The rationale for the proposal is that once excess domestic stock is shipped, local prices will improve and help the beleaguered sugar industry realise better returns. It can then be used to clear dues worth about ₹17,300 crore owed by mills to cane farmers as of mid-July. The levying of an additional tax on the sweetener was another proposal to help mop up arrears to farmers primarily in Uttar Pradesh, Maharashtra and Karnataka.

Average ex-mill prices are currently below ₹20/kg, while cost of production is around ₹31-32, which has affected mills’ paying capacity. The Indian Sugar Mills Association (ISMA) has estimated carryover stock at the end of the season at 10.4 mt. “We usually keep about three months’ stock prior to the start of crushing. Our monthly requirement is about 2 mt, which works out to 6 mt requirement for catering to the domestic market for those three months. Hence, 4 mt is what can be exported,” the official explained.

Export sops and WTO He added that the export incentive of ₹4,000/tonne of raw sugar will not be continued after September 30, due to concerns raised at the World Trade Organisation. Under the scheme, India has sold around 800,000 tonnes this season, against 2.2 mt in 2013-14.

“If the proposal comes through then certainly domestic stocks will fall and the demand-supply scenario will adjust. Prices should then see a rise. However, we are yet to receive any information on the same,” said Abinash Verma, Director-General, ISMA.

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