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Sugar Bloc Livid As Centre Trims Sop For Exports

Date 15-May-2014
Subject Sugar Bloc Livid As Centre Trims Sop For Exports

The Union government has reduced the incentive for raw sugar export almost by a third from Rs 3,300 per tonne to Rs 2,277 per tonne for April and May. Calling it a betrayal , the sugar industry has said the decision will result in losses for mills which exported sugar in April and May. "The industry is not only surprised but highly disappointed about the reduction in the rate of incentive," said Abinash Verma, director general, Indian Sugar Mills Association (ISMA).

The Ministry of Consumer Affairs , Food and Civil Supplies issued the notification in this regard on May 7. In a letter written to the food secretary, ISMA has said: "According to the notification, sugar mills, exporters as also importing countries entered into contracts for export and import of sugar from India, and physically exported substantial quantities expecting Rs 3,300 per tonne as the incentive on raw sugar exports. Such a change in position by the government without any notice or any ground whatsoever, in contravention to the provisions of the Gazette Notification (law prescribed in this regard) has created a massive confusion in the market and a sense of betrayal amongst the millers of the country."

Based on the ruppe-dollar exchange rate criteria, the subsidy for April and May was working out to be Rs 3,800 per tonne. However, the industry was expecting it to remain constant at Rs 3,300 sper tonne as one has to go to the cabinet to increase the subsidy. The reduction will result in losses to the mills which have dispatched or exported sugar after April 1. According to industry sources, this quantity could be between 3 lakh tonne to 5 lakh tonne.

The downward revision of export incentive by almost one third is also likely to put pressure on domestic prices, which have seen a declining trend for the past few weeks. "There was a big disparity in the world market and the Indian market before the announcement of the raw sugar subsidy. A reduction in the subsidy has widened the disparity which will reduce exports and put prices in the domestic market under pressure," said Rahil Shaikh, managing director of the London head-quartered trading company ED&F Man.

The ministry of food had announced an incentive of Rs 3,300 per tonne for February and March 2014. It has to be calculated every two months after taking into account the average exchange rate of the rupee vis-a-vis the dollar during the seven days immediately April 1, June 1, and August 1 for April-May , June-July and August-September respectively . Claiming that it is not according to the law prescribed by the ministry in February, ISMA has said the reduction in the rate of incentive cannot be appreciated as there is more than surplus sugar in the country which needs to be exported .

"Ex-mill sugar prices have not only fallen in the past one month but continues to be lower than the cost of production leading to losses to the industry when cane price arrears for farmers continue to be outstanding at historically highest levels at over Rs 12,000 crore," said the letter.

Source : economictimes.indiatimes.com

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