Sugar exports set to resume as CCEA approves Rs 6,000 per tonne incentive

Though the incentive was lower than last year, considering that the world sugar prices are higher compared with rates at the same period a year ago, the industry would perform well this season too, he said.

The incentive approved by the CCEA is against the average Rs 9,750 a tonne provided last year for sugar exports. It helped India export a record 57 lakh tonnes of sugar.

Sugar exports had come to a standstill since October 1 as the industry and exporters awaited the Union government’s decision on incentive.

Varma said two-and-half months of the current season had got over, the industry should be able to meet its target of exporting 60 lakh tonnes.

This considering that several large importing nations have been enquiring about sugar from India, the world’s second-largest producer, and also considering that sugar production in Thailand has dropped.

“The incentive gives an opportunity for India to export to its traditional markets such as Indonesia, Malaysia etc.,” Varma said. This will help reduce the carryover sugar stocks of 10.7 million tonnes at the beginning of the season.

Even then, the carryover would be reduced to only 9.6 million tonnes since India’s sugar production is higher this season at 31 million tonnes. Last season, production was 27.42 million tonnes.

Varma said the 60 lakh tonnes would give the sugar industry Rs 18,000 crore from exports and subsidy, which will help reduce cane arrears owed to farmers.

As on September 11, sugar mills owed growers about Rs 13,000 crore for the crop procured last season, Minister of State for Food and Consumer Affairs Danve Raosaheb Dadarao told Parliament.

The incentive is required as domestic prices are higher, ranging from Rs 31,000 a tonne in Maharashtra to about Rs 32,500 in Uttar Pradesh.

Compared with domestic prices, white sugar prices in London, which topped $410 (Rs 30,150) a tonne last month, have dropped to $392.50 (Rs 28,850).

Prices rose in London today by 90 cents a tonne, while raw sugar prices in New York too gained 0.77 per cent at 14.32 cents a pound.

The sugar industry received a further boost with the CCEA clearing a budgetary allocation of Rs 5,300 crore towards last year’s incentives. It will help the sugar mills clear the money they owe to farmers.

According to Rahil Shaikh, Managing Director, MEIR Commodities, sugar exports had slowed since October 1 and only about one lakh tonnes could have been shipped.

“Exports will help sugar mills’ liquidity. Also, the market will move up once the picture is clear,” said DK Sharma, Wholetime Director, Awadh Sugar and Energy Limited.

The sugar industry is looking to make good of a window of opportunity available after arrivals from Brazil, the world’s biggest sugar producer, ended. The new crop will not hit the market until March, and it will provide Indian exporters an advantage.

The export incentive will help the industry as the sugar market is expected to be almost balanced during the current season.

Sugar production could be lower-than-expected as the crop in Brazil and the Americas is being threatened by La Nina, a weather pattern in the Pacific Ocean that is known to cause droughts.

Global sugar production, including from beet, during 2020-21 is forecast at 173.46 million tonnes, but sugar consumption could also rise by 2.6 percent to 174.19 million tonnes. That will result in over 0.7 million tonnes deficit.

(Subramani Ra Mancombu is a journalist based in Chennai who writes on commodities and agriculture segments.)

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.