The government on Monday announced cash incentives for the export of raw sugar, a move aimed at helping loss-making millers but one that may stoke India’s already high food prices, especially in a poor monsoon year.
Food minister Ram Vilas Paswan said import duty on sugar will be raised from 15% to 40% to curb cheap imports, which millers say hurt profitability in a year with sufficient local sugar stocks.
Paswan also announced that mandatory blending of ethanol — derived from sugar molasses — in gasoline will be increased to 10% from 5 %.
Sugar prices rose by around Rs 600 per tonne — an increase of 1.5% — following the duty hike that made overseas buying of sugar from countries such as Brazil, Thailand and Pakistan economically unviable.
The government will also continue an export subsidy of Rs 3300 per tonne to help make exports profitable amid lower international prices.
More than 2 million tonnes of sugar is likely to be exported in the sugar year 2014-15, as India looks set to produce a surplus for the fifth straight year. India is the world’s largest sugar consumer and the second-largest producer of the politically-sensitive commodity.
Millers have said the move would help the sugar industry clear pending arrears to farmers, which now hover around Rs 11,000 crore.
"The abductees are being used as porters to carry weapons," a government official said.
"The 40% duty would also ensure no sugar from other nations makes its way into Indian markets, which has a surplus of 20-25 lakh tonnes of sugar," Abinash Verma, director general of the Indian Sugar Mills Association, said.
A subdued monsoon – predicted by the Indian Meteorological Department and independent experts – can set prices soaring due to fear of a future shortfall.
Food ministry officials, however, said there was no need to worry as the country had sufficient sugar stock to meet the demand.
In spite of good stocks due to bumper harvests for the past five years, imports -- cheaper than locally-made sugar -- were heavily impacting profit margins.
In 2013, the government removed all controls on the sugar industry with mills no longer required to set aside a part of their produce for the government’s public distribution handouts.