In order to offload surplus stock and clear the cane arrears to farmers totaling Rs 14,000 crore, the government is planning to allow sugar producers to export 4 million tonnes of the sweetener under the barter system with countries from where India imports agricultural commodities like pulses and edible oils. This push for exports could lead to further losses at mills but eventually create a balance between demand and supply. Union Food Minister Ram Vilas Paswan said, “We want to allow export of 4 million tonnes of sugar to those countries where there is demand for the sweetener”. The government may also step in to help mills pay dues by using funds raised from the tax. A final call on export mechanisms will be taken after another meeting and with the assent of the PM.
The sugar industry is lacking behind to make payments as it facing a severe liquidity crunch on account of surplus production that has resulted in low prices of sugar in the domestic market. Currently the Ex-mill sugar prices are below Rs 20 per kg, while the production cost is over Rs 30 per kg which has affected mills paying capacity. The government is expected to have more than 10 million tonnes of surplus sugar from the current year, which will in future put pressure on the market price.
Government is also examining on the feasibility of making it mandatory for mills to export some quantity of sugar from its total annual production only when output is higher than the local demand. The mandatory export rule, which could be introduced from the start of the next crop year on October 1.