Pertaining Challenges To The Sugar Industry And Govt. Measures

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The Government of India has recently undertaken a lieu of steps in response to challenges pertaining to the Sugar industry. Some recent developments have proven to be a breather, although causing a set-back to the Sugar Industry in some aspects. Indian sugar industry was surrounded by number of obstacles, and struggled hard to overcome it. At one side where India pushes itself hard for the revival of Sugar industry, the other end it faces the strong opposition from the countries like Australia, Brazil and Guatemala.

Indian Sugar Mills Association welcomes rise in ethanol prices for 2019-20 Ethanol an important industrial chemical; used as a solvent, and as an additive to automotive gasoline has been taken into consideration by the Government as Indian Sugar Mills Association said that the industry is investing in ethanol capacities. Industry body Indian Sugar Mills Association has welcomed central government’s decision to increase ethanol prices for 2019-20. Avinash Verma, Director general – Indian Sugar Mills Association (ISMA) said, “Government’s decision to increase ethanol price once again, with special emphasis and a higher increase for ethanol made from B-heavy molasses, confirms the Government’s commitment towards encouraging more diversion of the surplus sugarcane/sugar into ethanol.

ISMA said that the industry is investing in ethanol capacities. “The industry is responding very positively by hugely investing in new or expansion of ethanol production capacities, which will ensure that we will achieve the Government’s 10% ethanol blend targets almost certainly by 2022. Overall another excellent and very positive policy decision by the Government to encourage more production of the green bio-fuel and at the same time reducing some of the surplus sugar as also helping in more timely payment to our cane farmers.”

Low international sugar prices to hit India’s exports
Last month, the Cabinet Committee of Economic Affairs had announced a Rs 6,268 crore subsidy package to allow export of 60 lt of sugar from the country. Millers were to be given Rs 10,448 per tonne of sugar exported in lieu of handling, marketing, packaging and other costs. The amount was to be directly credited into the bank accounts of farmers and balance was to be credited to the mills. Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association, said current international prices are not viable for exports, which might put a spanner in the government’s plan of 60 lakh tonne (lt) of exports.

However, this scheme, Kuvadia said, will not drive up exports given the exceptionally low international prices of both raw and white sugar. At current international rates, white sugar will have to be exported out at Rs 21 per kg, which means ex-mill realisation of Rs 19.50. Taking into account the Rs 10 per kg subsidy, the realisation of Rs 29.50 is lesser than the present Rs 32-32.40 per kg price. The scenario is almost the same in case of unrefined or ‘raw’ sugar, which is retailing at Rs 18 per kg in the international market. In the last season, of the 50 lt export target, mills exported just 38 lt of sugar. But the delay in crediting the transport subsidy has been a major problem for mills.

Instead of exporting, millers say they would prefer converting their old stock of sugar into ethanol, which will be procured by oil companies at Rs 59.48 per litre. This would be the first time in the country when mills would be allowed to manufacture ethanol directly from sugar and cane juice. Mills in Maharashtra, whose carry forward stock is higher than those in Uttar Pradesh, would prefer to take this route rather than exporting. M D Joshi, managing director of the Kolhapur-based Jawahar Shetkari Cooperative Sugar Mill, said the stock which is lying unsold for the last 2-3 years would be converted to ethanol. “This would allow mills to generate ready cash and also liquidate their old stock,” he said.

India trying to race Brazil by rushing exports
Sugar mills are trying to lock in deals with buyers from China to Iran to begin exports from October 1, when fresh government subsidies kick in.
The millers will start shipping from the country’s record stockpiles instead of waiting for the new sugar crop to become available to fully use the time it has until April, when supplies from rival Brazil start to flood the market, according to an industry association.
Producers are talking to importers in West Asia, China, East Africa, Bangladesh, Iran and Sri Lanka with a view to starting shipments from next month, the beginning of the new season, Abinash Verma, director general of the Indian Sugar Mills Association, said in an interview. Higher exports may put further pressure on global prices that are hovering near a one-year low, further irritating major growers.

Demand by WTO to set up dispute settlement panel to review India’s sugar subsidy
Brazil, Australia and Guatemala had sought establishment of a dispute panel under the aegis of the World Trade Organization (WTO) in a case against India’s sugar subsidies to farmers.
India has stated that the measures were consistent with its WTO obligations.

Earlier this year, these countries have dragged India into the WTO’s dispute settlement mechanism alleging that New Delhi’s sugar subsidies to farmers are inconsistent with global trade rules. Brazil is the largest producer and exporter of sugar in the world.

“At a meeting of the Dispute Settlement Body (DSB) on 15 August, WTO members agreed to establish panels requested by Brazil, Australia and Guatemala to review India’s support measures for the sugar sector,” the WTO said in a statement.

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