The food and consumer affairs ministry on Thursday proposed a 25% duty on exports of sugar to boost domestic supplies and stem a rise in prices witnessed in recent months.
“There is an increasing trend in the price of sugar in the international market. Traders may increase the export of sugar to make profit. Therefore, to keep the export of sugar in control, it is purposed to levy 25% custom duty on export of sugar,” Food and consumer affairs minister Ram Vilas Paswan tweeted.
“It will keep sufficient availability of sugar in domestic market and the price will be under control,” he said in another tweet.
The government has taken a series of measures in recent weeks to curb a rise in prices, including suspending an earlier order for the compulsory sugar exports of 3.2 million tonnes and capping the amount of sugar that dealers and traders can pile up at 500 tonnes across states, except Kolkata, to discourage hoarding.
Domestic sugar prices climbed around 40% since the current marketing year started on October 1, 2015 on fears that sugar output in 2016-17 could drop by as much as 14% from a year before. Already, according to the estimate by the Indian Sugar Mills Association, the country is likely to produce 25 million tonnes of the sweetener in 2015-16, down 11.7% from a year ago.
While earlier decisions came amid apprehensions that a back-to-back drought in key regions of Maharashtra and Karnataka could cut India’s sugar output in the next marketing year starting October, the latest proposal by the food ministry is aimed at restricting exports even if global prices soar further and make supplies from India attractive. The average global sugar price rose close to 12% in May from the previous month.
The International Sugar Organization had in February predicted global sugar deficit for the current marketing year through September at 5 million tonnes, compared with 3.5 million tonnes announced in November, anticipating lower production in India, Thailand, Brazil and the EU. The London-based sugar body said it expected global sugar output of 166.8 million tonnes in 2015-16, against 171.2 million in 2014-15. “Although 2015/16 is expected to be the third consecutive season of shrinking global output, for the first time since 2008/09 the production fall is so pronounced as to exceed 4 million tonnes,” it said.
Cane planting in India, Brazil and Thailand has already been affected by El Nino and the resultant erratic weather in some producing regions in the 2015-16 marketing year.
These decisions, however, come as a setback for sugar mills that have witnessed losses for almost three years due to the fixing of cane prices at elevated levels, mainly by states like Uttar Pradesh (although even the price fixed by the Centre was too high to pay last year). Elevated debt levels have compounded their woes.