Govt allows sugar exports of up to 5 lakh tonnes

The government allowed sugar exports of up to five lakh tonnes amid sharp decline in retail prices and prospects of surplus production in the current season. The decision was taken by an empowered group of ministers (EGoM), headed by Finance Minister Pranab Mukherjee. Earlier, there were differences on the export quantity, as the Agriculture Ministry favoured five lakh tonnes, while the Finance Ministry was wanted to restrict it to two lakh tonnes. Sources said, as a caution against the risk of price rise, the exports have been limited to five lakh tonnes, although the country is estimated to have an exportable surplus of 1.5 million tonnes in the 2010-11 sugar season (October-September). "Yes, we have allowed export of five lakh tonnes of sugar," a senior minister who was part of the EGOM told reporters after the meeting. Reacting to the government's decision, Indian Sugar Mills Association President Narendra Murkumbi said: "It is a welcome move and will improve the ability of mills to pay farmers on time." Recently, Agriculture Minister Sharad Pawar had written to Mukherjee stating that sugar export should be allowed to prevent a situation of cane arrears to farmers. "If sugar prices are not stabilised and cash flows to mills are not improved, I fear that we will end up paying a huge subsidy to clear cane payment arrears of farmers," Pawar had pointed out in his letter. With India's sugar production estimated to rise to 24.5 million tonnes in 2011-12 (October-September), against domestic demand of 22 million tonnes, the government had earlier allowed mills to meet their export obligations of about one million tonnes under the Advance Licence Scheme (ALS). The Food Ministry had also allowed and notified export of 5 lakh tonnes of sugar under Open General Licence (OGL), but the decision was kept on hold in view of high inflation and the matter was referred to the EGOM. Sugar industry has been demanding export of sugar under OGL as there is a exportable surplus of about 1.5 million tonnes after meeting the export obligation under ALS. They also pointed out about ex-mill price of sugar has fallen below the cost of production. In Uttar Pradesh, cost of sugar production is Rs 2,950 per quintal, while ex-mill price is Rs 2,800 per quintal.Similarly, in Maharashtra, cost of production is Rs 2750 per quintal, ex-mill price is Rs 2,600 per quintal. Retail prices of sugar have declined sharply in the national capital to Rs 30-32 per kg from nearly Rs 50 per kg in January last year. Apart from Mukherjee and Pawar, Food Minister K V Thomas, Commerce Minister Anand Sharma, Defence Minister A K Antony, Home Minister P Chidambaram and Rural Development Minister Vilasrao Deshmukh attended the meeting. .

India’s buffer stocks are at comfortable levels and the country is expecting a bumper harvest of grains, he was quoted by Financial Express as saying.

Food ministry data says that as on February 1, about 47 million tons of food grains are stored in the warehouses of Food Corporation of India. 27.8 million tons of rice and 19.37 million tons of wheat ranks above the strategic reserve and buffer stocks norms.

Further, India is expected to record wheat output to the tune of 81.47 million tons in 2010-11, against 80.71 million tons in the previous year. Rice output would be to the tune of 94 million tons this year as against 89 million tons for previous year, while sugar output is expected to touch 24.5 million tons production mark for 2010-11 compared with 19 million tons of previous year. (Annual Indian domestic sugar demand is pegged at 22 million tons while opening stocks of the commodity is at 5 million tons).

Given the scarcity of rice and wheat in the international market, the prices of grains, globally, are staying up. China is the latest in a row to fall prey to the scourge of drought and some analysts are of the view that China may even consider importing of wheat; something which it has not done for decades.

In India, a ban has been in place for exports of wheat since February 2007 and non-basmati rice since April 2008.