With sugarcane arrears climbing to Rs. 11,000 crore this month and India likely to produce 26 million tonnes (mt) of the sweetener this season, the industry is pushing for the Centre to announce a continuation of the export incentive scheme on raw sugar at the earliest to help farmers and beleaguered mills.

The production estimate, revised upwards by the Indian Sugar Mills Association (ISMA) from 25-25.5 mt earlier, marks a fifth consecutive year of surplus output in a scenario of excess supply which has depressed prices. The revised numbers are due to higher output in Maharashtra and southern Karnataka.

India, the world’s second largest sugar producer, had produced 24.3 mt in the 2013-14 marketing year and annual demand is pegged at 24.8 mt. Ex-mill prices according ISMA representatives are the lowest in three years and currently stand at Rs. 2,700-2,750/quintal down from Rs.3,000-3,050/quintal at the start of the season on October 1.

“The export incentive must be announced as soon as possible with only a month and a half of crushing left. Thailand and Pakistan have already announced support for their domestic industries while prices here have declined by Rs.3 per kg,” said A. Vellayan, President, ISMA, at a meeting with reporters here on Friday.

Trouble ahead

Vellayan feared that arrears which had crossed Rs. 13,000 crore last March-April will likely to rise if Government support on the export front is not forthcoming. As of Friday, arrears in Uttar Pradesh stood at Rs. 4,600 crore while Maharashtra had outstanding payments amounting to Rs. 1,650 crore.

Last February, the UPA-led government had provided mills an export subsidy between Rs. 2,277 and Rs. 3,371 a ton on raw sugar and had shipped about 7,50,000 tonnes under the scheme.

“The review of the scheme and extension was supposed to have been done at the start of the season. Last season, after the incentive was announced, exporters had managed to ship about 7,50,000 tonnes which helped prop up prices,” he told Business Line.

A subsidy of Rs. 4,000/tonne on raw sugar exports has been recommended by the sugar directorate but the Cabinet is yet to approve the plan. Vellayan believed that at least 2 mt of surplus sugar was required to be exported given an opening stock of 7.5 mt if sugar prices were to rise.

Regarding the pricing of cane, Vellayan suggested that State Governments bear the difference between the fair and remunerative price (FRP) announced by the Centre and that State Advised Price (SAP) and urged consideration of the Rangarajan-panel recommended formula for a rationalised pricing policy to be adopted across the country.

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