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India to provide subsidy to export 6 million tonnes sugar in 2019/20

By Rajendra Jadhav
A farmer works in his sugarcane field on the outskirts of Ahmedabad

By Rajendra Jadhav

MUMBAI (Reuters) - India's cabinet has approved incentives of 62.68 billion rupees ($876.74 million) to encourage cash-strapped mills to export 6 million tonnes of sugar in the 2019/20 marketing year starting from Oct. 1.

The export subsidies are designed to increase shipments from the world's biggest sugar producer, reducing brimming inventories. But that could pressure global prices which are trading near their lowest level in 11-months.

The government will provide a subsidy of 10,448 rupees ($146.14) per tonne for the exports, it said in a statement.

Indian industry officials, however, said the approved subsidy was lower-than-expected and may fail to boost sales.

"We were expecting more than 12,000 rupees per tonne subsidy considering the drop in global prices," said a sugar miller, who declined to be named.

"The approved subsidy may not encourage every mill to export," he said.

Years of bumper cane harvests and record sugar production have hammered Indian sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To reduce that debt and pare rising inventories, New Delhi in 2018 approved incentives to mills to sell sugar overseas, setting an export target of 5 million tonnes for the 2018/19 marketing year ending on Sept. 30.

But dealers said that mills have only managed to export around 3.8 million tonnes so far.

In the next marketing year, India could export 3.5 million tonnes to 4 million tonnes of sugar if global raw sugar prices remain below 12 cents per lb, said a Mumbai-based head of a global trading house.

"To achieve a target of 6 million tonnes, prices need to recover above 13 cents," he said.

October raw sugar futures were up 1.8% at 11.44 cents per lb at 1457 GMT, having hit a low of 11.09 earlier in the day, the weakest since early October 2018.


WTO DISPUTE

Reuters earlier reported that India will maintain its sugar export subsidies despite complaints to the World Trade Organization (WTO).

Earlier this month, the WTO set up panels to rule on complaints by rival producers Australia, Brazil and Guatemala against India's export subsidies for sugar and sugarcane producers which they assert are illegal.

"These subsidies are WTO compliant so there will be no issues at international forums," Environment Minister Prakash Javadekar said after Wednesday's cabinet meeting.

The subsidies for transport and marketing of agriculture products are allowed until 2023 under various WTO rules, India Trade Minister Piyush Goyal said.

India is expected to start the new marketing year with carry forward stocks of 14.2 million tonnes and could produce another 27 million tonnes in the season against local demand of around 26 million tonnes.


($1 = 71.4920 Indian rupees)


(Reporting by Rajendra Jadhav; Editing by Kirsten Donovan)