India’s raw sugar production plunged 92% in the first four months of the current marketing year through September even though overall sugar output rose substantially, thanks to a delay in the announcement of the continuation of a subsidy scheme for exports this year.

Raw sugar production from October through January was just 64,000 tonne, compared with 7,93,000 tonne a year before, according to the data by Indian Sugar Mills Association (Isma).

Raw sugar is barely consumed in the country, so its production is dependent on export opportunities. Mills say in the absence of a subsidy, its exports have become unviable and consequnetly cane arrears owed to farmers have hit a whopping R12,300 crore until mid-February. The government had announced the subsidy scheme for raw sugar exports last year to enable cash-strapped mills to diversify their product base and also trim huge inventory of refined sugar.

“Delay in announcement of export subsidy has further depressed the domestic market and sugar mills in the western and southern parts of the country have started offering refined sugar for even below R2,400 per quintal, ex-factory. In the northern part, ex-mill prices are ruling around R2,650 per quintal. Since the start of the current crushing season, ex-mill prices in the domestic market have declined by R5-6 per kg and are at their lowest in 3-4 years,” Isma said.

Last February, the CCEA had approved the subsidy proposal for two seasons through September 2015, but it had also said the “incentive shall be reviewed before the commencement of the next sugar season (2014-15)”.

Sugar output rises 15%

Sugar output in the country rose 15% till mid-February in the marketing year, extending a drop in prices below costs caused by a fifth straight year of surplus production through 2014-15.