Projecting a dip by nearly 50 per cent in sugar exports to 10 lakh tonnes this season (October-September) from 18 lakh tonnes, sugar industry on Wednesday demanded enhancement of incentives given by the government.

"With the appreciation of rupee against the dollar, the government should accordingly increase the extent of incentives towards ocean freight and 'fobbing' cost on a WTO compatible basis," Shanti Lal Jain, director-general, Indian Sugar Mills Association, told PTI in New Delhi.

He said despite heavy losses, sugar industry embarked upon exports in a significant manner, shipping a record four million tonnes in the past three years.

However, with the appreciation of the rupee, exports are no longer feasible and must be given an additional push, he said. At present, the government provides Rs 350 a tonne, ocean freight and Rs 500 per tonne, fobbing cost to the exporting mills -- which should be hiked, Jain said.

He said though there is a huge market waiting to be tapped, including that in China, mills are price-uncompetitive. Exports therefore may fall to a mere 10 lakh tonnes from 17.67 lakh tonnes last season.

He said exports last year increased to nearly 18 lakh tonnes from 10.53 lakh tonnes in 2001-02 primarily because Maharashtra mills exported an additional seven lakh tonnes on account of a Rs 1,000 a tonne incentive given by the state government.

Jain said at present the Maharashtra mills are not active in the international market as the domestic prices are higher than the global rates. Unlike mills in south India or elsewhere which undertake a cost-benefit analysis and account for interest and storage costs, those in Maharashtra initiate exports only if the rates in global market are more attractive than in the domestic market.

He said ex-mill export prices in India at present are around Rs 11,000 a tonne against Rs 12,000 a tonne being fetched in the domestic market. Maharashtra mills were active in world market when domestic rates had dipped to Rs 10,000 per tonne.

At present only around Rs 9,500 a tonne is being fetched in the international market.

The adverse export scenario is already visible, he said, adding shipments in the October-December quarter have fallen to three lakh tonnes against 3.65 lakh tonnes in the same quarter last year.

"It is not that there is lack of demand, prices are not attractive," he said and pointed out that with suitable incentives from the government, 35-40 lakh tonnes can be exported every year to China alone.

He suggested that sugar released for export should be made free of any adjustment against domestic releases and exporting units be given the benefit of additional releases in domestic market equal to the quantities exported by them.

This would be a very significant relief to the exporting units at the cost of those who do not participate in exports, thus inducing much larger participation of sugar mills in the export effort, he added.