Sugar Producers Say Export Subsidy Will Help Ease Glut, Lift Prices 

India’s sugar producers said the government’s subsidy to double exports will not only help clear farmers’ dues but will also ease glut after a record output and lift prices.

The cabinet has approved export subsidy for 60 lakh tonnes (6 million tonnes) of sugar at a cost of Rs 6,268 crore, Prakash Javadekar, minister for Information and Broadcasting, said in a press conference in New Delhi. The subsidy will be directly transferred to farmers’ accounts on behalf of sugar mills against cane dues, he said.

The payout is set at Rs 10,448 per metric tonne for the 2019-20 sugar season. It will be offered for expenses on marketing costs, including handling, upgrading and other processing costs, and international and domestic freight charges.

The move will not only reduce the surplus sugar inventory next season but will also provide additional cash flows worth around Rs 18,000 crore including the subsidy amount, said Abinash Verma, director general at Indian Sugar Mills Association. This will help the mills reduce carrying costs and interest burden, he said, adding that an expected global deficit next year of around 40 lakh tonnes would aid exports.

This is the second such boost for the sugar industry in less than a year after the government increased the minimum support price for sugar ahead of the Lok Sabha polls in February by Rs 2 to Rs 31 per kilogram. And it could rankle other sugar-producing countries when Australia, Brazil and Guatemala have already requested the World Trade Organization to set up a panel to challenge India’s subsidies. India, which vies with Brazil as the world’s biggest sugar producer, is estimated to see record production in 2018-19.

Piyush Goyal, railways and commerce minister, however, said at the press conference that the WTO allows some subsidies for agricultural products until 2023. Verma also said that Rs 10,448 per tonne subsidy is WTO compliant.

According to Javadekar, the sugar surplus is 162 lakh tonnes, of which 40 lakh tonnes is buffer and 60 lakh tonnes will be encouraged to be exported, and some will go to ethanol production. “These schemes will benefit farmers struggling with low sugar prices.”

In 2018-19, the buffer stood at 30 lakh tonnes and the government targeted exports of 50 lakh tonnes—actual exports stood at 30 lakh tonnes though.

Sugar millers’ lobby had also sought an increase in the MSP from Rs 31 a kilogram to Rs 35-36. The sugar prices had tumbled in 2018 because of the glut but have since recovered.

“We are looking at a much higher carryover of stock from previous season and this (export subsidy) will help liquidate the surplus sugar and subsequently provide comfort to the depressed prices,” Atul Chaturvedi, executive chairman at Shree Renuka Sugars Ltd., said. But he isn’t sure about meeting the export target and expects outbound shipment to be around 30 lakh tonnes this year as well. “It all depends on how the global markets behave and the joker in the pack is Iran [which has started buying raw sugar from India] because of the sanctions on it.”