Commodities

Sugar companies await ₹5,600-crore export subsidy from Govt

Our Bureau Mumbai | Updated on October 02, 2020 Published on October 02, 2020

This is in addition to ₹2,500 crore in receivables towards buffer stock and interest subvention schemes

After setting a new record in exports, sugar companies are now looking up to the government for the release of ₹5,600 crore, the promised export subsidy as of August-end.

The dues are in addition to the ₹2,500 crore in receivables from the government towards buffer stock and interest subvention schemes.

Also read: Sugar mills await decision on MSP from Centre

Armed with the export subsidy, sugar companies have registered a record shipment to tide over the perennial oversupply situation in the domestic market. Despite Covid pangs, sugar exports from India had touched a new high of 5.5 million tonne (mt) till August, against 3.8 mt logged in the same period last year. The previous highest export of 4.9 mt was logged in sugar season (October to September) 2008.

The increase in exports was also supported by the depreciation of the rupee.

Being an essential commodity, sugar exports continued despite the strict lockdown imposed in March.

Overseas demand

Large sugar companies such as Balrampur Chini Mills and Dalmia Bharat Sugar and Industries made the most of the surge in overseas demand on the back of lower production in Thailand, Indonesia and Malaysia. In fact, Indonesia extended its preferential lower import duty to India and Australia to make up for its lower supply from Thailand.

Also read: India’s sugar subsidies, transport assistance, food stocks scrutinised at WTO

This apart, exports to Iran also increased to a 15-year high. Iran and Indonesia together imported the highest quantity of 1.2 mt of sugar, said an India Ratings and Research report.

However, exports from India could come under pressure the next sugar season with production in Brazil bouncing back, the report added.

The Indian government is expected to retain export subsidiary due to the prevalent oversupply in the domestic market and the unviability of exports in the absence of a subsidy. However, in view of the Covid-led stretch in government finances, the admissible quantity and the subsidy rate are unlikely to be increased from the existing levels of 6 mt and ₹10.4/kg, respectively.

Oversupply to continue

While the 18 per cent decline in sugar production to 27.2 mt this season is likely to reduce the closing stock to 11.5 mt (14.3 mt), it would still remain almost twice the normal carry-forward requirement.

India Rating expects sugar production to increase to 30 mt in this season. Sugar volumes are likely to have been back to near-normal in the second-half of this fiscal, which would limit the decline to about 3 per cent in FY21.

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Published on October 02, 2020
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