The government’s move to extend subsidy on raw sugar exports is expected to provide some salve to the industry, hit by huge surplus stocks and record low prices.
The Cabinet Committee on Economic Affairs has cleared the extension of subsidy of Rs.4,000 a tonne (Rs 3,371 a tonne for the year ended September, 2014) on the export of 1.4 million tonnes of raw sugar in the sugar crop year 2014-15 (October, 2014, to September, 2015).
“At the current global and domestic prices, raw sugar exports are just viable with the incentives,’’ Indian Sugar Mills Association (ISMA) Director-General Abhinash Verma said in a statement. “The sugar mills have been waiting for a long for the news and importantly huge inventory will start moving out,’’ UP Sugar Mills Association (UPSMA) Secretary Deepak Guptara told this correspondent.
“We are hopeful that the situation improves, and there is cautious optimism,’’ he added.
ISMA estimates sugar production at 16.708 million tonnes up to February 15, an increase of 15 per cent. India is estimated to produce 26 million tonnes of sugar in the current season against the demand of 24.7-24.8 million tonnes.
ISMA estimates there is surplus sugar of around 2.5 million tonnes, and the industry will require incentives for another 1-1.5 million tonnes. “This is the only way forward for the industry to pay cane price even at the fair and remunerative price (FRP) level this season, otherwise the cane price arrears, which are at Rs.12,300 crore, will soon cross Rs.13,000 crore recorded in the last season,’’ Mr. Verma said.
Indian exported around seven lakh tonnes of raw sugar in the year ended October, 2014. Mills produce raw sugar only after finalising export contracts and ISMA said till January 31, sugar mills produced only 64,000 tonnes of raw sugar.
“Owing to the delay of around five months in the announcement, there is little time to produce 1.4 million tonnes, and it seems unlikely that figure will be achieved,’’ Geofin Comtrade analyst Pallavi Munankar said.
“The raw sugar is mainly exported to countries such as China, and West Asia and used by their standalone refineries.’’