Agriculture minister Sharad Pawar announces big sops for sugar sector

21 Sep 2007

India''s record sugarcane crop this year has prompted the government to more than double its reserves to 5 million tonnes, and subsidise exports to prevent a glut. The government will detail these new incentives in the next 10 days, agriculture minister Sharad Pawar said on Thursday 20 September.

Mills may also be allowed to produce ethanol directly from cane juice, instead of molasses, to lower their dependence on sugar prices, he said. Molasses is a by-product of the sugar refining process.

India may require fuel refiners to double the ethanol level in gasoline to 10 per cent from October next year, according to media reports. The government passed a law in May last year requiring a 5 per cent ethanol mix in gasoline from November 2006.

India, which is set to surpass Brazil as the world''s biggest sugar producer, may extend subsidy to exporters beyond April next year as it tries to boost overseas sales amid a glut of the sweetener caused by a record harvest.

The union government in April announced a freight subsidy of as much as Rs1,450 per tonne to run down stockpiles, after production reached a record. The incentive is valid for a year.

"Unless we liquidate stocks, we will not be able to improve the position of farmers and sugar mills," Pawar said in New Delhi on Thursday. "We will take a decision soon," he added.

Sugar shipments from India in the year starting October may more than double to 2.5 million tonnes (mt), making the country the biggest exporter of the commodity after Thailand and Australia, the US foreign agricultural service had said in May.

A further increase in supplies from India may further drag down global prices of sugar, among the worst-performing agricultural commodities in the past year. The country may increase sugar output by 15 per cent next year, up from an estimated record 28.5 mt this year.