New deals have dried up in the sugar sector after the Cabinet approved subsidy for raw sugar as global buyers and local exporters are quoting low prices after the announcement of subsidy. 

 

Sugar millers, who expected to get better realisation from exports than domestic sales after the subsidy, are not willing to sign deals at lower prices. About 30-40% of the sugar mills in Maharashtra, the main exporter of raw sugar, are expected to close by April 10. There is uncertainty on how much more raw sugar the country can produce and export in the current marketing year. 

According to industry estimates, India has so far exported about 7 lakh tonne to 8 lakh tonne of raw sugar. The total raw sugar exports are expected to be between 1.2 million tonne and 1.4 million tonne. 

 

Sugar mills produce raw sugar only when there are orders as it has a shelf life of only about two months. Most of the raw sugar is exported as the domestic demand is negligible. 

As the price of white sugar in the domestic market crashed to . 23/kg to . 24/kg ex-mill, the millers were expecting to get better realisation from raw sugar. 

 

The ex-mill price of raw sugar at the beginning of the season was about . 24/kg to . 25/kg. 

The mills were expecting to get a realisation of about . 28-29/kg for raw sugar after availing the subsidy. With exporters now quoting lesser prices, millers are hesitating to enter into contracts.