London/New Delhi, April 10
Sugar futures on the ICE hit their lowest in more than 2-1/2 years on Tuesday amid growing concerns that India will export its surplus to the world market.
August white sugar was down $7.20 at $333.90 by 1114 GMT, after hitting $332.70 a tonne, the weakest for the second position since late August 2015. May white sugar, which expires on Friday, was down $2.80 at $344.80.
Dealers said prices were pressured by expectations that the Indian government is poised to introduce a subsidy in a bid to make exports to the world market viable. The subsidy would likely spur Indian refiners to export excess white sugar sooner than previously expected, dealers said, adding pressure on a global market already grappling with excess supplies.
Prices were also weighed by stronger-than-expected production in Thailand, where cane crushing is under way, dealers said. May raw sugar also fell 0.22 cents to 12.14 cents/lb, after hitting 12.11 cents, its weakest since late September 2015. Dealers said prices were dragged lower by the whites market and by technical weakness, after they slipped below technical support levels.
Sugar development fund
Meanwhile, the Centre may levy a cess of around ₹1-2 per kg on sugar to create a fund, which can be used to finance measures such as export incentives, sources said.
Earlier, the government used to levy a cess of ₹124 a quintal on sugar mills, which was passed on to consumers. The cess collected went to the Sugar Development Fund — managed by the Food Ministry — for modernisation and expansion of mills. The cess is not in force any more as most indirect taxes were subsumed under the GST regime rolled out in July.
“The Food Ministry may soon float a Cabinet note to put the Cess Act in place, after which the details will be discussed,” a government official said.
“The government is likely to levy a cess of ₹1.5 per kg and the industry is in favour of it as this is the most appropriate time to take this step,” a senior industry official told Cogencis.
Currently, retail prices of the sweetener are hovering around ₹37/kg and consumers are used to paying around ₹40, he said. “So, a cess of ₹1.5 should be completely okay.”
The sugar industry which is grappling with higher production has been seeking export-linked subsidy on cane to help lift prices, which have fallen by over 15 per cent since the beginning of the season in October.