Govt likely to pay cane growers to help mills

The government is likely to provide financial support to cane farmers for produce sold to sugar mills, two government sources said, in a rare move to subsidise the industry which is reeling under a glut and struggling to export because of low global prices.

India, the world’s biggest sugar consumer, last month scrapped a 20 per cent export tax and made it compulsory for mills to export at least 2 million tonnes of sugar. But mills said they would incur a loss of at least $150 a tonne because global prices were near a two-and-a-halfyear low.

Prime Minister Narendra Modi’s administration is likely to approve a proposal to pay around ~55 ($0.84) for every tonne of cane sold to the mills, two government sources said, seeking anonymity in line with government policy.

Although India is not planning any direct incentive for sugar exports, rival suppliers such as Brazil, Australia and Thailand could still lodge complaints with the World Trade Organization (WTO), saying such support will help Indian industry to sell overseas.

Brazil, the world’s biggest sugar producer, has already expressed concerns over the policies that support overseas sales of the sweetener from India and neighbouring Pakistan.

Government officials insist India’s plans to directly pay cane growers would not contravene WTO rules.

But it will boost the prospects of 50 million cane farmers, an influential political lobby, and 524 mills struggling with massive mounds of sugar. While the government plans to pay ~55 a tonne to cane farmers, mills would pay the rest of the state-set price, sources said.

Every year, the federal government fixes the price that mills must pay to cane growers, but Uttar Pradesh state, the biggest producer, usually raises the rate to placate farmers.

For the 2017/18 season, the federal government fixed the cane floor price at ~255 per 100 kg, while Uttar Pradesh raised the rate to ~315 per 100 kg.