New Delhi may offer more stock subsidies to sugar firms

It would also extend freight incentives for domestic sugar mills looking to export for a year beyond their planned expiry in April, the official, who did not wish to be identified, said yesterday.

Top sugar exporters Brazil, Thailand and Australia have accused India of becoming the international rogue of the sugar trade by giving the freight subsidies.

In June, officials said firms were free to stockpile up to five million tonnes of sugar, increasing the cap from an earlier two million tonnes, with the government meeting costs. It said the buffer stocks, which also help protect prices by restricting excess supplies, could be kept for a year.

"We are going to take a call in a month's time," the official said. "We have two options, we can increase the buffer stock limit or increase its validity beyond one year."

Sugar supplies in India, the world's second-biggest producer and largest consumer, started surging from July 2006 after the government banned exports in a bid to curb rising prices.

The restriction was lifted in January 2007 but record output has added to the woes of mills.

The freight subsidies give mills located in coastal areas 1,350 rupees ($34.24) per tonne for exports, while in the north they receive 1,450 rupees per tonne.

Agriculture Minister Sharad Pawar last week said the government might extend the incentives by one more year.

Faced with a massive increase in sugar exports by India, which has risen to challenge Brazil as the world's top producer, Australia and Thailand joined forces to complain about Indian subsidies in the World Trade Organisation in November.

"We need to support our struggling sugar sector as some other countries are doing," the official said.