Nothing sweet about this

Long-term sugar export policy is needed

The government, in a bid to boost sugar exports, plans to subsidise sugar exporters by covering their cost of internal transport and freight expenses on export shipments. This measure, intended to counter similar subsidies extended by other nations to their domestic sugar industry, has been taken to prevent Indian sugar from being priced out of the world market. Apart from being an ad hoc measure, it remains to be seen if the proposal dovetails with the Mahajan Committee’s recommendations on abolition of all incentives, including subsidies. The government, in fact, plans to export 11.5 lakh tonnes in the 2000-01 sugar season. So far, 3.3 lakh tonnes valued at Rs 428 crore have been exported. Such optimism is, perhaps, explained by a bumper sugar output: stocks of about 172 lakh tonnes, almost equivalent to a year’s output. But going by past performance, such optimism is misplaced. Sugar exports are exempt from all levy obligations, these quantities treated as advance free sugar release. The government also allows duty entitlement at 5 per cent of the freight-on-board value of sugar exports. Moreover, there are no quantitative restrictions on sugar exports. Yet, these measures have failed to have any perceptible impact upon sugar exports.

India is the second largest sugar producer in the world but hardly a low cost one. Consequently, it is not a leading sugar exporter like Australia, Korea or Japan. Our exports of raw, white or refined sugar face competition from Spain, Sri Lanka, Pakistan, Kenya and Mexico. An export target of 25-30 lakh tonnes in the coming season is thus over-ambitious. Sugar exports need organising on a competitive basis after taking care of domestic requirements. The government must make exports an integral part of the sugar policy. Sugar did not count for much in India’s agricultural exports in the years from 1996-97 to 1999-00. Sugar subsidy can also not be a surrogate for a long-term sugar export policy that should provide fair prices to farmers and consumers, as well as adequate incentives to mills to produce more for exports. A systematic approach toward a long-term sugar export is needed — the Mahajan Committee’s recommendation to step up research and development to realise low costs deserves consideration. The introduction of latest technology also can ensure cost efficiency in order to compete effectively in global markets.