Govt announces incentive for mills exporting sugar, diverting it to ethanol

Source: PIB

Introduction

The Government of India is taking proactive measures to boost the export of surplus sugar & diversion of sugar to ethanol. The move is to ensure timely payment of cane dues of sugarcane farmers and to boost the agricultural economy.

Measures taken by Government for Sugar Industry:

1. India is the world’s second-largest sugar-producing country. It had to offer export subsidies in the past two years to reduce surplus stocks and help cash-starved sugar mills clear cane payment to growers.
2. However, the global sugar prices have increased substantially in the past one month, and there is a huge demand for Indian raw sugar.
3. Accordingly, the Government has asked domestic sugar mills to export sugar and sign forward contracts with the importers to take advantage of high international prices of sugar.
   • A forward contract is a customized contract between two parties to buy or sell an asset at a specified price on a future date.
4. Moreover, the Government has announced that sugar mills that export sugar and divert sugar to ethanol will also be given incentives in the form of an additional monthly domestic quota for sale in the domestic market.
   • Currently, the government fixes a monthly quota for the sale of sugar in the domestic market. On an average, about 21 lakh tonne quota is fixed for a monthly sale for mills.

Benefits of Export of Sugar:

1. Export of sugar would not only help in improving the liquidity of sugar mills but also enable them to make timely payments of cane dues of farmers.
2. It would also stabilize the price of sugar in the domestic market, which will, in turn, improve the revenue realization of sugar mills and would address the problem of surplus sugar.

Benefits of Diversion of Sugar to Ethanol: 

1. Dependence on imported fossil fuel will decrease
2. It will reduce air pollution
3. It will also boost the agricultural economy.