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Centre averse to sugar buffer stock plan

Kohinoor Mandal

KOLKATA, Sept. 17

THE Indian sugar industry is concerned over the falling demand for the commodity particularly when production has been very high resulting in heavy carry-forwards. It wants the Union Government to create a buffer stock utilising the Sugar Development Fun d (SDF) but North Block officials feel the move may discourage millowners from exporting their produce and sending it to the buffer stock instead.

The industry has been trying to persuade the Union Government to create a buffer stock of two million tonnes and thereby relieve it of its huge inventories and lighten the consequent financial burden. The cost of creating the buffer stock would be about Rs 400 crore, which could be financed by SDF the existing credit balance of which is Rs 1,200 crore.

However, the Union Finance Ministry feels the creation of a buffer stock will discourage sugar mills from exporting their production which would affect adversely the flow of foreign exchange into the country. Till last year, sugar exports were not permit ted by the Union Government. Only recently was the approval given with an initial target of a million tonnes for the sugar year 2000-2001.

``Notwithstanding the sizable losses, the sugar industry rose to the occasion and achieved the export target. So there appears to be no justification whatsoever in adopting a discriminatory approach towards the sugar industry simply on the basis of unfou nded misgivings,'' an official of the Indian Sugar Mills Association told Business Line.

In this context, the official cited the example of the foodgrain industry, where production too had surpassed demand. ``Since, in this case, the Government itself is involved, there has been no opposition to building a huge buffer stock, which it has to finance and store. Moreover, it has to promote exports at a reduced price and record losses to the tune of 50 per cent of the production cost,'' he said.

Meanwhile, sugar production continued to register impressive gains. From 129 lakh tonnes in 1997-98, it went up to 155 lakh tonnes in 1998-99 and to 182 lakh tonnes in 1999-2000. In 2000-01, output touched 185 lakh tonnes. While production increased by 4 3 per cent in three years, domestic consumption rose by just eight per cent.

The accretion to stocks has been even more phenomenal. In 1998-99, the sugar year (October to September) started with a stock of 52 lakh tonnes. It increased to 66 lakh tonnes in 1999-2000 and 100 lakh tonnes in 2000-01. The sugar year beginning on Octob er 1, 2001, is expected to start with a carry-forward of 115 lakh tonnes, which in fact means that stocks have grown by as much as 125 per cent over the past three years.

The industry also argued that it had paid a cess regularly to set up the SDF one of the main objectives of which was to create a buffer whenever the situation demanded. The sugar industry is perturbed over the fact that despite a considerable healthy cre dit balance, the Union government is not prepared to use the fund to create a buffer stock.

The official also drew attention to the fact that, on four previous occasions, the SDF had been utilised to create a buffer stock.