New Delhi: Indian Sugar Exim Corp. (ISEC), formed by India’s private sugar mills, plans to offer incentives to firms faced with a sugar glut to boost exports, a senior industry official said on Friday.
“The ISEC plans to offer some subsidy to mills, but details are still being worked out,” said Vinay Kumar, managing director, National Federation of Cooperative Sugar Factories.
“It is too early to say how much subsidy ISEC will give. It may be up to $15 a tonne,” he said.
Kumar said the support could involve help with transportation but details would be finalised next week.
Indian Sugar Exim Corp., which exports and imports on behalf of private sugar mills, is jointly run by the Indian Sugar Mills Association and National Federation of Cooperative Sugar Factories.
Industry officials say an export subsidy previously announced by the government was not sufficient to make sales competitive.
The government last month said sugar mills in coastal areas would get a subsidy of Rs1,350 a tonne, while those in the north would get Rs1,450 to help prop up exports.
India is likely to produce 27 million tonnes of sugar in the year ending September 2007. Domestic demand is pegged at 19.5 million tonnes.
Kumar said the government has approved 1.5 million tonnes of sugar exports since a ban on overseas sales was relaxed in December, but only half of this has been shipped out.
Indian mills, which have an obligation to export around a million tonnes of refined sugar in lieu of imports of duty-free raw sugar, are finding it difficult to tap overseas markets due to a global surplus stocks and low prices.
Sugar industry officials said India might continue to be in surplus for two more years, and the government must abolish local taxes and raise buffer stocks to help millers tide over the crisis.
In the absence of incentives, sugar millers could take four to five years to recover from a bearish cycle created by a surplus of 5 million tonnes, they said.
“The surplus situation in India is unlikely to change before 2008-09,” said Shivajirao G. Patil, chairman of ISEC.
The government has already created a buffer stock of 2 million tonnes but mills want this to be raised to 5 million tonnes.
— Additional Reporting by Abhishek Shanker in Mumbai