Prime Minister Narendra Modi on Saturday called for higher ethanol content in petrol and a concerted effort to push exports in a bid to lower the current sugar surplus and protect the interests of farmers to whom factories owe an estimated Rs.15,000 crore in cane arrears.
"Taking note of the current supply-demand issues with regard to sugar, the prime minister called for assiduous efforts to increase ethanol blending of fuel. He also called for exploring all possibilities for export of sugar," an official statement said, after a high-level meeting here.
"The prime minister also reviewed the progress with regard to the Rs.6,000 crore incentive package approved by the union government in June 2015," the statement added, referring to the soft loan extended to sugar mills so that they can clear the arrears to farmers.
"The prime minister emphasized that the farmers' interest be kept foremost at all times and issues related to sugar sector be monitored regularly. Long-term measures with regard to the sector were also discussed."
Among those at the meeting were Finance Minister Arun Jaitley, Agriculture Minister Radha Mohan Singh, Food Minister Ram Vilas Paswan and Commerce Minister Nirmala Sitharaman, besides senior officials from their ministries, Niti Aayog and the Prime Minister's Office.
The meeting also came against the backdrop of the Indian Sugar Mills Association (ISMA) estimating the sugar production during the sugar season 2014-15 (October to September) at 28.3 million tonnes and another 28 million tonnes in the next season, besides a carry over of 10 million tonnes.
As a result, supplies have outstripped demand for the fifth straight year. The annual demand is around 25-26 million tonnes.
The sugar mills have warned that if the surplus stocks are not reduced, they may be forced not to start crushing cane in the upcoming season, beginning October 1. But analysts feel the situation was unlikely to improve soon.
"ICRA expects that given the continued sugar surplus scenario in the domestic market and limited possibility of exports in face of falling international sugar prices, domestic sugar prices will continue to remain under pressure in the near term," aid the ratings agency in its latest report.
"Sugar mills are likely to liquidate their sugar stocks at low prices following pressure from various state governments to clear the high cane arrears," it said, while also adding: "Government support and rationalization of cane prices will be key factors for restoring the financial health of sugar industry."
In the past few months, besides the soft loan of Rs.6,000 crore, the government has raised the import duty on sugar from 15 to 40 percent, increased the export subsidy to Rs.4,000 per tonne and raised the level of ethanol blending in petrol to 10 percent.
The government also allowed the export of additional 2,095 tons of raw sugar to the US under the tariff rate quota, under which imports there attract a relatively lower customs duty. Prior to that, 8,424 tonnes of raw sugar had been notified for export to the US.
