Government may allow 200,000 tonne of sugar exports today

Having waited for several months, the government is likely to allow around 200,000 tonne of sugar exports on Tuesday under unrestricted sales or the open general license (OGL) which will be first tranche of the half a million tonne of exports announced earlier.

Last December, the Union Food and Agriculture Minister Sharad Pawar had announced sugar exports to the tune of 5 lakh tonne. However, the government, hit by high food inflation, kept the issue undecided and later referred it to the Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee. The group is slated to meet on Tuesday to consider operationalising the announcement.

The reason behind not allowing sugar exports even as domestic production scenario seemed rosy and prices were crashing was overall high food inflation. The government had withheld the request by the farm ministry as food inflation was not witnessing the traditional decline over the months of Nov-Dec. However, with the food inflation now showing significant decline in the months of Jan-Feb, there is a possibility that government will allow some exports. 

The meeting of the EGoM is being held after Pawar sought the intervention of the Mukherjee for an early decision on this issue because the window to export sugar from India is available only up to end of April. In May, sugar from Brazil, the largest sugar producer in the world, will start coming into global markets, making it very difficult for Indian producers to exports. Also, global prices might come down further by then, which will make exports unprofitable by Indian exporters.

According to the agriculture ministry, extension of stock limits and substantial surplus production of the sweetener has depressed domestic prices below cost of production. If prices remain down, it will impact the payments to cane growing farmers, which in turn will impact the area under sugarcane cultivation in the next season, thus impacting sugar output next year. 'If sugar prices are not stabilized and cash flow to mills are not improved, I fear that we will end up paying a huge subsidy to clear cane payment arrears of farmers,' Pawar said while seeking intervention of Mukherjee in exports.