The Hindu Business Line : Ministries slug it out over sugar exports

Bitter battle
Export ban has been in place since July 4
Sugar has higher WPI weightage than diesel
Production in new season seen higher than last year

New Delhi , Nov 1

After wheat, it is sugar that is emerging as a flashpoint between the Finance and Agriculture/Food Ministries. If the dispute was over minimum support price (MSP) for this year's crop in the case of wheat, in sugar it is over lifting of ban on exports.

While Agriculture Minister Mr Sharad Pawar was able to push through an MSP of Rs 750 per quintal for wheat, against Rs 700 proposed by the Finance Ministry, the latter is now attempting to get even on the sugar export front.

With the peak festival demand having subsided and factories commencing crushing operations for the new sugar season (October-September), Mr Pawar is keen to see an end to the export ban, which has been in place since July 4.

The Finance Ministry, however, is not very keen, as it fears impact on domestic prices.

Sugar has a weightage of 3.62 per cent in the official wholesale price index (WPI), more than that of cement (1.73), steel (3.2) or even diesel (2.18).

Given such a high weightage - relative to the value of trade in the commodity - even the slightest increase in sugar prices tends to disproportionately impact the WPI-based inflation rate.

This is added reason for the Finance Ministry's extra sensitivity to sugar prices.

The Ministry is of the opinion that the opening stocks with mills on October 1 - estimated at 42 lakh tonnes (lt) by the Food Ministry and around two lt lower as per data collated by excise authorities - are not comfortable enough to allow resumption of exports.

The figure is marginally below 45 lt for October 1, 2005.

The Food Ministry's counter is that even if stocks may be lower, production during the new season, at 220-230 lt, would be way above 190 lt of 2005-06.

Therefore, there is flexibility to permit export of 20-25 lt without any undue worry on the availability front.

The most important indicator, though, is prices. Sugar currently retails at Rs 20.50 per kg in Mumbai, compared to Rs 22 at this time last year.

The corresponding rates are Rs 17.50 (Rs 19) for Chennai, Rs 19.50 (Rs 21) for Kolkata, Rs 21 (Rs 21) for Delhi and Rs 20 (Rs 21) for Hyderabad and Patna.