MUMBAI: India’s cabinet on Wednesday approved a subsidy of 35 billion rupees ($475.78 million) to encourage cash-strapped mills to export 6 million tonnes of sugar in the 2020/21 year that started on Oct. 1.
The export subsidies are designed to increase shipments from the world’s second biggest sugar producer, reducing brimming inventories. But that could pressure global prices which are already trading near their lowest level in 7-weeks.
An outstanding export subsidy amount of 53.6 billion rupees from the previous year will be transferred to the accounts of sugar cane farmers within a week, information minister Prakash Javadekar told reporters after the cabinet meeting.
The allocation of 35 billion rupees for exports of 6 million tonnes translates into subsidy of 5,833 rupees per tonne, which is lower than the industry’s expectation of 8,000 rupees and last year’s subsidy of 10,448 rupees, said a sugar miller.
The subsidy helped India to export a record 5.7 million tonnes of sugar in the 2019/20 season ended on Sept. 30.
Despite the lower subsidy, India could export 6 million tonnes of sugar as prices have risen in the world market, said Abinash Verma, the director general of the Indian Sugar Mills Association (ISMA).
“The drop in sugar production from Thailand gives an opportunity for India to export to their traditional markets like Indonesia, Malaysia,” Verma said.
Sugar output in Thailand, the world’s second-largest exporter after Brazil, is expected to fall to the lowest level in a decade as drought hit cane plantation.
However, some Indian industry officials said the country could export between 4 to 5 million tonnes as the subsidy announcement was delayed this year by nearly three months.
“There was export demand but mills could not sign contracts due to uncertainty over the subsidy. Now they will start making raw sugar for exports,” said Praful Vithalani, president of the All India Sugar Trade Association (AISTA).
Indian mills traditionally produce white sugar for local consumption.
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