The Government has decided to allow export of an additional one million tonne of sugar and has cut the minimum export price (MEP) for basmati by $200 a tonne.
The Empowered Group of Ministers under the Finance Minister, Mr Pranab Mukherjee, on Tuesday decided to permit further sugar exports while reducing the MEP on basmati to $700 a tonne from $900 a tonne, officials said.
A formal announcement to this effect is likely to be made after seeking the Election Commission's approval. This is mainly due to the ongoing assembly elections in Uttar Pradesh, where sugarcane is a major crop.
The Government had allowed sugar exports of 1 million tonne on November 22. So far the Directorate of Sugar has issued release order for export of 8.5 lakh tonnes. Tuesday's approval to export an additional one million tonne will help the sugar millers take advantage of the relatively high export prices, which were of late on a downward trend.
The Indian Sugar Mills Association (ISMA) said the one million tonne export will help the sugar mills realise an additional Rs 3,000 crore, which should help them to pay farmers at a time when crushing is in full swing. In a bumper cane season, sugar millers are already reeling under the impact of high cane prices as liquidity pressures build-up prompting them to default on payments to farmers. ISMA expects the 2011-12 sugar output to be a minimum of 26 million tonnes on higher cane area and better recovery in largest producing state of Maharashtra. In the October-January period of the current sugar season, the production has grown by 17 per cent to 13.27 million tonnes.
“The industry would need some more exports as soon as possible to take care of the balance surplus,” ISMA said.
Welcoming the move to reduce MEP on basmati, Mr Vijay Sethia, President of All India Rice Exporters Association, said “it was a long awaited decision.”
A decline in basmati prices on higher output was seen hurting new contracts as buyers were not willing to pay a higher price. The prices of basmati, over the past one year, had crashed from an average of $1100 a tonne to around $650 a tonne, triggering a demand from exporters to abolish the MEP. The MEP was introduced a couple of years ago to ensure that non-basmati is not exported as basmati.