New Delhi: India has no plans to subsidise sugar exports and is considering building a buffer stock to help mills facing a price crunch, Farm Minister Sharad Pawar said on Tuesday.
“We feel the benefits of export subsidy will not come to the benefit of the domestic industry as international prices will come down,” Pawar told reporters on the sidelines of a meeting on plant varieties.
“We are giving serious thoughts to create a buffer. This will go to the cabinet in the next 15 days,” he said.
Sitting on a huge surplus and faced with softening domestic and international prices, sugar mills have been urging the government for transport and freight subsidies to make exports viable.
Sugar prices have fallen in the last six months to about $300 a tonne from $400, making exports unprofitable. India banned sugar exports in August when global prices were high and lifted the restriction in January when prices fell sharply.
Pawar said the ministry was examining proposals from the industry that wants the government to maintain a buffer and release stocks when required, or have mills to hold the stocks with funds from the government.
He said with improvement in weather conditions, the summer harvested wheat crop should be better than earlier estimates of 72.5 million tonnes.
“I must say the situation is extremely good and production will definitely cross 72.5 million tonnes.
India was forced to import 5.5 million tonnes of wheat in 2006 after a poor crop.
Pawar attributed a rise in prices of some commodities like pulses and wheat to a demand-supply mismatch rather than trading in commodities derivatives.
Some politicians say speculation has contributed to inflationary trends and are seeking a ban on futures trading.
But analysts defend futures trading — introduced in 2003 to help farmers hedge price risks — and say an expanding economy, where consumption is rising faster than supplies, is stoking inflation.
India’s wholesale price inflation rate is at a two-year high, reaching an annual 6.73% in early February.
“Yes, we have received a proposal to ban futures trade. But the price rise has been due to growing economy, increased money supply and demand-supply mismatch,” Pawar said.
“If somebody is exploiting the system we have to see how corrective steps are taken,” he said, but was non-committal on whether government will ban trading. REUTERS