NEW DELHI - India is considering scrapping the 20 percent export duty on sugar, the country's food minister said on Friday, as the government tries various ways to lift prices of the sweetener amid expectations of a surge in production this marketing year.
India, the world's second-biggest sugar producer, this month doubled the sugar import tax and imposed a cap on the amount mills can sell in February and March, moves aimed at arresting a steep fall in prices that have hurt companies' ability to pay sugarcane farmers.
Sugar prices have fallen around 16 percent in the local market since the 2017/18 marketing year started on Oct. 1, making it difficult for mills to pay farmers an 11 percent government-mandated hike in cane prices.
"We're heading towards a reasonably big surplus and we recently doubled the import duty on sugar to 100 percent," Ram Vilas Paswan, the minister for food and consumer affairs, told reporters. "There are various demands from the industry, including scrapping the export duty. We're considering it."
Paswan said the government expects sugar production to jump to 24.9 million tonnes in the ongoing 2017/18 marketing year, which would be 23 percent higher than the 20.2 million tonnes in 2016/17.
The Indian Sugar Mills Association (ISMA), whose production estimates typically differ from the government's, has projected output of 26.1 million tonnes this season.
Local consumption is expected to be around 25 million tonnes, which means around 1 million tonnes can be exported, according to the ISMA. That could further weigh on international prices, which have fallen about 8 percent in the past three months.
The jump in production and the resulting fall in prices have also forced states such as Maharashtra, India's second-biggest sugar producer, to consider directly buying big chunks of its output.
The moves could help prop up shares of companies such as Shree Renuka Sugars, Balrampur Chini Mills Ltd, Dwarikesh Sugar Industries and Simbhaoli Sugars.
Sugar production swings wildly in India, where half of the country's farmland depends on the June to September monsoon rains for water because of a lack of irrigation. Sugar cane is very water-intensive.