India to Produce More Raw Sugar to Increase Exports, Ease Glut

India plans to increase raw sugar output to boost exports and ease a glut that’s sent prices to near a 19-month low in the world’s second-largest producer.

Mills will be given financial assistance in accordance with the World Trade Organization rules to make 4 million metric tons of the raw variety in the year that began on Oct. 1, Agriculture Minister Sharad Pawar told reporters in New Delhi today. The unprocessed sugar may fully be exported, said M.G. Joshi, managing director of the National Federation of Cooperative Sugar Factories Ltd.

Mills are seeking to increase exports to trim record losses as cane costs climb and prices in New York head for a third year of declines, the longest slump since 1992. Bajaj Hindusthan Ltd. and Balrampur Chini Mills Ltd. were among companies in India’s Uttar Pradesh state which shut mills for two weeks last month to demand government aid to pay state-set cane prices to farmers.

The factories are hurt by a rule that allows states to fix cane rates to help about 50 million farmers, a powerful voting bloc, to earn more. Mills in Uttar Pradesh, the nation’s biggest cane grower, agreed to begin crushing on Dec. 1 after the state government said it will review cane pricing methodology next year and consider linking the rates to the price of the sweetener.

The mills may get about 72 billion rupees ($1.17 billion) of interest-free loans to pay dues of farmers, Pawar said. The loans will have a repayment period of five years with a two-year moratorium, he said. A portion of the interest will be paid from the state-run Sugar Development Fund and the rest will be borne by the government, he said. Debt of sugar makers may be recast as per the Reserve Bank of India rules, he said.

Clearing Arrears

The government steps “will help the industry clear arrears of farmers and also venture into production of a new product, raw sugar, to diversify its product mix to grab opportunities whenever they are available,” Abinash Verma, director general of the Indian Sugar Mills Association, said in an e-mailed statement.

The Food Ministry will prepare a proposal to stockpile sugar to clear surplus inventory, Pawar said. The government may consider doubling blending of ethanol with gasoline from 5 percent now, Pawar said. Sugar imports will be monitored and duties will be raised to reasonable levels to check cheap inflows, he said.

The proposals will need approval of the cabinet, Pawar said.

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