The sugar industry is suggesting creation of buffer stock and direct conversion of cane juice into ethanol to reduce supplies in the market, as steps like increasing import duty and giving a subsidy for exports have failed to improve local prices.
A government subsidy of more than Rs 3,300 a tonne for the export of raw sugar has helped reduce surplus sugar but hasn’t improved prices, which are range bound between Rs 28.50 and Rs 30 a kilogram. To reduce shipments from abroad, import duty on the sweetener was increased to 25% from 15%. However, the industry says this would help in only reducing uncertainty about imports, and not in supporting the domestic prices.
Considering weak global demand and expectation of surplus sugar production in the 2014-15 sugar season beginning October 1, the industry estimates the pressure on prices to continue. Even as the central government is making efforts to enable sugar mills clear their arrears to sugarcane farmers, Vinay Kore, member of Parliament from Kolhapur and a sugar baron, has written to Union Minister for Consumer Affairs, Food and Public Distribution Ram Vilas Paswan, requesting the creation of a buffer stock of 7.7 million tonnes for the next three years to supply through the public distribution system. The demand has been backed by some export houses too.
The industry is well aware of the risks from such a buffer stock on future prices. When to sell sugar from the buffer stock will be a critical decision if the 201516 season also sees a bumper output, as that could affect market prices then, said a representative of a private sugar industry. The private sugar industry has already suggested to the government about production of ethanol directly from sugarcane juice, a strategy adopted by Brazil, the largest sugar producer.
“The best solution would be to give permission to produce ethanol directly from sugarcane juice so as to take away the surplus sugar from the market,” said Indian Sugar Mills Association Director-General Abinash Verma.
The current ethanol requirement of oil companies for 5% blending with petrol is 1.05 billion litres. The government has declared its intentions of increasing the blending proportion to 10%, which would increase the ethanol requirement. In recent tenders, the sugar industry has offered to supply 0.62 billion litre ethanol.