India Recommends Incentives to Aid Sugar Mills
December 10, 2013 Leave a comment
India Recommends Incentives to Aid Sugar Mills
RAJESH ROY
Dec. 6, 2013 6:49 a.m. ET
NEW DELHI—An Indian ministerial panel on Friday recommended a package of financial incentives, including interest-free loans, to help loss-making sugar mills to sustain their production this year.Mills have been struggling as sugar prices have declined, while prices of cane have either increased or remained unchanged from last year in most provinces. In India, prices of cane are determined by state governments and prices of refined sugar are set largely by market forces.
The majority of mills had refused to start production last month, the peak cane harvesting period, unless the cane prices were lowered. Indian mills normally begin processing the sugar harvest in early to mid-November.
The federal government has been working on a package of incentives to placate the mills and ensure that output in the world’s second-largest sugar producer doesn’t suffer.
Farm Minister Sharad Pawar told reporters that a government panel had decided to offer interest-free loans for five years to help mills tide over. The government is also planning further incentives for sugar production, he added, without elaborating.
Over and above, mandatory level of ethanol blending with gasoline would be raised to 10% from 5%. In India, ethanol is derived from sugar cane and prices are largely market-determined. “These are all our efforts to help farmers and the industry,” said Mr. Pawar.
The panel’s recommendations would need to be approved by the cabinet.
“The industry welcomes the initiatives of the central government to help the sugar industry to face the financial crisis it is going through,” said Abinash Verma, director general of Indian Sugar Mills Association in a written statement.
He said the measures would help the industry to clear millions of dollars payment arrears to cane farmers and help mills diversify their production, but reiterated a demand for linking cane prices to sugar.
Sugar cane farmers oppose a shift to market pricing for their products, saying they cannot shoulder the risk as sugar prices fail to keep pace with the rising costs of imported fertilizer and other inputs.
Most mills have ended their protest and resumed their production of sugar since this week, according to Mr. Pawar.
The breakthrough was achieved after Uttar Pradesh, India’s largest sugar cane producing state, allowed mills to defer part of their cane payments and agreed to reimburse part of the cane price.
In the year ended Sept. 31, India produced 25.1 million metric tons of sugar, making it the second-largest producer in the world after Brazil.
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