NEW DELHI, (Reuters) – India is likely to bring in rules to make it compulsory for sugar mills to export millions of tonnes of surplus supplies to support local prices, sources said, in a move that could quell growing anger among farmers but add to a glut on global markets.
A final decision rests with Prime Minister Narendra Modi, who discussed the politically sensitive issue at a weekend meeting with ministers, officials and sugar mill bosses, said the two government sources.
The proposal, which could mean mills selling at loss, comes at time when the world sugar market is grappling with a flood of supplies and prices at 6-1/2-year lows.
The mandatory export rule, which could be introduced from the start of the next crop year on Oct. 1, would apply only when output was higher than local demand, said the officials, who are directly involved in formulating the policy. If approved, India could overtake Australia as the world’s third-largest exporter behind Brazil and Thailand.
Food ministry spokesman N.C. Joshi declined to comment.
Shares of Indian sugar companies such as Bajaj Hindusthan Sugar Ltd, Shree Renuka Sugars Ltd, Simbhaoli Sugars Ltd and Bannari Amman Sugars Ltd
jumped as much as 12 percent after the Reuters report.
Apart from boosting farm exports, government-backed overseas sales of sugar could also help mills clear about $2.5 billion they owe to 50 million cane growers – a group equivalent in size to the population of Spain and concentrated in politically important states like Uttar Pradesh and Maharashtra.
Last year, Modi won 9 out of 10 seats in Uttar Pradesh, which sends the highest number of lawmakers to parliament, as rural voters were swayed by a pledge to keep crop prices high.
