Govt to provide incentives for raw sugar exports

A group of ministers (GoM) headed by agriculture minister Sharad Pawar has approved incentives to the beleaguered sugar industry for exports of up to 4 million tonnes of raw sugar over two years.

Export of raw sugar will help India reduce the stocks of refined sugar that are piling up because of low prices, food minister K V Thomas said.

The quantum of incentives would be worked out soon, after consultations with the finance ministry, he added.

India, the world's second-biggest producer of sugar, is faced with the dilemma of rising output and falling prices of sugar, adding to the disincentives to sugar mills that have accumulated huge arrears in payments to cane farmers.

The group of ministers, constituted by the prime minister to address the financial problems being faced by the sugar industry, has already announced interest subsidy on bank loans to be availed by sugar mills for paying cane farmers.

"We have decided to give incentives to promote raw sugar as a new product. Incentives will be given for export of up to 4 million tonnes for two seasons," Thomas told reporters after the meeting.

Thomas said the policy of incentives is compatible with WTO norms and would be reviewed constantly.

Thomas said funds for providing export incentives would come from the Sugar Development Fund of the Food Ministry and it would be on per tonne raw sugar basis.

Besides Thomas, finance minister P Chidambaram and civil aviation minister Ajit Singh were present at the meeting.

Sources, meanwhile, said the food ministry has proposed an incentive of Rs2,390 per tonne of raw sugar exported, with the central and state governments sharing the burden.

However, the GOM is believed to have suggested reworking the quantum of incentives.

At current international prices of Rs22,500 per tonne against the production cost of Rs26,500 per tonne, export of raw sugar would lead to a loss of Rs4,500 per tonne, sources pointed out.

The Indian Sugar Mills Association has suggested an incentive of Rs3,500 per tonne of sugar exported, below which it will not be viable for sugar mills to undertake raw sugar exports.