India's
biggest sugar producing state, Maharashtra, approved a subsidy of Rs 1,000 per
tonne for raw sugar exports, a senior state government
official said, in an attempt to reduce inventory that has depressed local
prices.
Exports from India, the world's second-biggest producer and
largest consumer, would put pressure on global prices that are struggling to revive
from six-year lows.
Maharashtra
accounts for most of the raw sugar produced in the south Asian country.
The state cabinet approved the incentive for the raw sugar
produced in the 2014/15 marketing year ending on Sept. 30, the government
source, who declined to be named, told Reuters on Tuesday.
“Subsidy
will be applicable for exports of 800,000 tonnes raw sugar," the official
said.
The state has been contemplating export incentives since
February.
"Exports subsidy will help mills, but large quantity is
unlikely to be shipped," said Sanjeev Babar, managing director of
Maharashtra State Co-operative Sugar Factories.
"Most sugar factories have closed their operation. They
produced mainly white sugar. Availability of raw sugar is limited for
exports."
Indian mills traditionally produce whites for local consumption,
although lately the government has encouraged them to produce raws for exports
in an attempt to trim bulging inventories.
"This
is time to provide subsidy for white sugar exports. Then only mills can reduce
inventory meaningfully and clear farmers' dues," said a dealer with global
trading house, who was not authorized to speak to the media.
Surplus production for five straight years has piled up
inventories and the country is likely to start the new marketing year on Oct. 1
with carry forward stocks of 9.5 million tonnes.
Due to plunging domestic sugar prices - down 16 percent over the
past seven months - mills' financial health has been eroded to the extent that
they now owe more than $3 billion to cane growers for purchases made since Oct.
1, 2014.
In February, the central government decided to
give mills a subsidy of 4,000 rupees a tonne for exports of up to 1.4 million
tonnes of raw sugar, an incentive some traders said may be too little as global
prices remain weak with large supplies from top producer Brazil set to flood
the market soon.
source: businesstoday.intoday