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Sugar export subsidy may go before Sept deadline

The subsidy on sugar exports, which continues despite rising inflation, may be withdrawn before it lapses at the end of next month.

, ET Bureau|
Last Updated: Aug 22, 2008, 12.10 AM IST|Original: Aug 22, 2008, 12.10 AM IST
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NEW DELHI: The subsidy on sugar exports, which continues despite rising inflation, may be withdrawn before it lapses at the end of next month. The move will affect all sugar exporters, including Bajaj Hindusthan, DCM Shriram and EID Parry. Pressure is mounting on food and agriculture minister Sharad Pawar to do away with the export sop soon.

The CoS on prices, which met this week, decided that the export sop should go, especially since domestic sugar prices have been rising steadily over the past few weeks. The option of banning sugar exports was, however, not considered.

The government has been subsidising inland movement of sugar in coastal states up to Rs 1,350 a tonne and Rs 1,450 a tonne for mills located in other states. Interestingly, this subsidy has been challenged by Australia and Thailand for being incompatible with WTO norms. Mr Pawar had already announced that sugar export subsidy, which was to be extended till April 1, 2009, would come to an end on September 31, 2008. However, with inflation refusing to be tamed and domestic prices of sugar on a high, the CoS has proposed that the subsidy should be withdrawn immediately.

���In the CoS meeting, it was observed that while export duties were being imposed on certain commodities like steel to disincentivise exports and check domestic prices, the sugar industry was continuing to enjoy export sops. It was decided that there was no ground for continuing with the sops since domestic prices were going up and it should be withdrawn immediately,��� an official told ET.

Sugar prices in the domestic market have increased by an estimated 25% over the past eight weeks to Rs 20-22 per kg from Rs 16-17 per kg. It is expected to go up further in the festival season.

India���s sugar exports touched about 43 lakh tonne till first week of August in the current October-September 2007-08 season. This is more than double of what was exported last season. ���While most members of the CoS supported withdrawal of export sops to sugar, there was no discussion on banning exports,��� the official said. India banned sugar exports for six months in July 2006 to increase domestic supplies and check prices.
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