India to pay sugarcane producers to help sugar industry
Prime Minister's administration is expected to approve a proposal to pay about INR 55 rupees for every tonne of sugarcane sold to mills.
India is expected to provide financial support to sugarcane producers supplying raw material for sugar mills, two government sources said in a rare move to subsidize the industry, which is suffering from oversupply and struggling to export amid low global prices.
India, the world's largest sugar consumer, canceled a 20 percent export tax last month and forced mills to ship at least 2 million tonnes of sugar. But the companies said they would incur a loss of at least $ 150 a ton because global prices were close to a two-and-a-half-year low.
Prime Minister Narendra Modi's administration is expected to approve a proposal to pay about INR 55 rupees for every tonne of sugarcane sold to mills, two government sources said on condition of anonymity.
While India is not planning any direct incentives for sugar exports, rival suppliers like Brazil, Australia, and Thailand can still complain to the World Trade Organization (WTO), saying such support will help Indian industry to sell overseas.
Brazil, the world's largest sugar producer, has already expressed concern about policies that support international sweetener sales from India and neighboring Pakistan.
Government officials insist that India's plans to pay sugarcane planters directly do not violate WTO rules.
But that will increase the prospects of 50 million sugarcane producers, an influential political lobby, and 524 mills battling huge amounts of sugar.
While the government plans to pay INR 55 per ton for sugarcane producers, mills would pay the remainder of the price set by the state, the sources said.
(With inputs from Reuters)