Malaysia has agreed to import 44,000 tonnes of sugar from India within weeks of New Delhi cutting the import duty on crude and refined palm oil from the Southeast Asian nation.

The shipment of the sweetener, apart from increasing the ex mill price of sugar and incentivising ethanol production, is one of the measures being considered by the government as cane arrears are set to touch Rs 35,000 crore by mid-April, around the time of the Lok Sabha elections.

“Malaysia has placed demand for 44,000 tonnes of sugar....we expect the demand to grow in the future,” a government official said.

India has inked deals to export around 1.5 million tonnes of the sweetener so far and more demand is expected from China and Indonesia, the official added.

“Discussions are on with the Chinese for early announcement of import quotas for sugar and rice for 2019 so that the Indian exporters are able to plan their shipments well in time,” officials added.

The government had sent officials to Bangladesh, China, Indonesia, Malaysia and South Korea to explore the possibility of exports at the government level.

Malaysia and Indonesia had earlier stated they could consider imports from India if duties on palm oil were cut.

The import duty on crude palm oil, originating from Malaysia, Indonesia and other members of the Association of South East Asian Nations (Asean), has been cut to 40 per cent from 44 per cent last month. The duty on the import of refined palm oil has been lowered to 45 per cent from 54 per cent, if imported from Malaysia, and to 50 per cent, if imported from other Asean members.

The government has asked millers to export 5 million tonnes of sugar mandatorily this year and has even given financial assistance to facilitate trade.

Industry sources indicated cane arrears could reach about Rs 35,000 crore by mid-April, when sugar production would be at its peak. Production is estimated at about 60 lakh tonnes, while sales are seen at only 20 lakh tonnes, adding pressure to the working capital of the mills and limiting their ability to pay arrears.

Ex mill sugar prices are in the range of Rs 29-30 per kg, about Rs 5-6 per kg below the production cost.

Sources said the government was worried cane arrears would peak around the time of the Lok Sabha elections. The two states — Maharashtra and Uttar Pradesh — account for almost 75 per cent of the sugarcane grown in the country and will have the maximum number of farmers waiting for arrears.

Uttar Pradesh has 80 seats in the Lok Sabha, while Maharashtra has 48 members. Both the states are ruled by the BJP.