Sops for raw sugar exports cut by ₹1,000 a tonne

The Centre has cut the incentive for raw sugar exports by over ₹1,000 a tonne to ₹2,277, drawing protests from millers.

In a notification issued last week, the Centre reduced the incentive from ₹3,300, aimed at encouraging exports of raw sugar in order to overcome glut in the domestic market. While fixing the incentive at ₹3,300, the Food and Consumers Affairs Minister KV Thomas had said that the facility would initially be extended for two months (February and March) and then, it would be recalculated every two months taking into account the average exchange rate of the rupee.

According to the notification, the revised incentive will be valid till May 31.

Expressing surprise over the move, Indian Sugar Mills Association Director-General Abinash Verma, in a letter to the Food Secretary, said that the industry is disappointed over the cut in the incentive rate.

Pointing out to the Gazette notification issued on February 28, Verma said the average exchange rate of rupee was to be calculated based on the dollar price during the seven days preceding April 1.

When the incentive was approved by the Government, the rupee traded at 62.44 against the dollar. Since then, the rupee has gained and ruled at 60.32 in the last week of March. Therefore, the rate should have been ₹3,800 and not ₹2,277, Verma said.

“Since there is no other criteria prescribed in the Gazette Notification of February 28, there cannot be any other position whatsoever than to either retain the original rate of ₹3,300 or to increase it. Therefore, the notification of May 7, reducing the incentive rate is not as per the law, prescribed by the Ministry,” the ISMA official said in the letter.

Based on the notification, exporters and buyers from other countries had entered into sugar deals in the belief that the incentive of ₹3,300 a tonne holds for raw sugar exports. But a sudden change in the Government’s stand without any notice was in contravention to the provisions of the February 28 notification. It has created confusion in the market and millers were feeling betrayed. The Government’s action to cut the incentive was wrong especially when there was sugar surplus, which need to be exported.

Sugar prices have dropped in the last one month and continue to rule below the cost of production, Verma said, adding that cane arrears to farmers have surged to over ₹12,000 crore.

The ISMA official wondered how the Government arrived at the figure of ₹2,277 and sought to know the reason for the cut in the incentive.

“What will happen to sugar mills which have dispatched or exported sugar after April 1 considering the Gazette Notification of February28, which is the only rule or order of the Government in public domain till now, and have done so on the clear understanding that the incentive rate would be ₹3,300/tonne. Who will compensate the losses to these sugar mills?,” asked Verma.

On April 20, PTI, quoting official sources, said that the Government had decided to continue the incentive for raw sugar exports at ₹3,300 a tonne during April-May.

Some four lakh tonnes of sugar were expected to be exported during April-May with some consignments already reaching the destination or on the way.

The issue has also figured at the World Trade Organisation with countries such as Australia questioning the move to offer incentives for exports. However, India has held firm and said that there was no going back on its commitment to encourage raw sugar exports. The Government came up with the incentive to cut production of white sugar. White sugar stocks in the country have been on the rise.

At the beginning of the current sugar year (October-September 2013-14), stocks were 8.8 million tonnes. Sugar output in the on-going year is expected to be 23.8 million tonnes, according to industry estimates, against a domestic demand of 22 million tonnes. The stocks are expected to go up and to combat a glut situation, the Cabinet cleared the Food Ministry’s proposal to allow exports of raw sugar.

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