Raw Sugar Export Incentive - A Helping Hand for the Sugar Industry

Ms. Pallavi Munankar, Research Analyst, Geofin Comtrade Ltd on Raw Sugar Export Subsidy.

In order to provide a helping hand for the drowning sugar industry, the government finally passed the long awaited proposal of export subsidy on raw sugar for the current production season. As per the statement of Cabinet Committee on Economic Affairs (CCEA), sugar mills will now be permissible to export 14 lakh tonnes of raw sugar and can receive a benefit of a subsidy of Rs.4,000 per tonne for this season 2014-15 i.e. 1st October 2014 to 30th September 2015. This will help mills to clear the mountain of dues to sugarcane growers.

In February 2014, the Cabinet Committee on Economic Affairs permitted a subsidy on the export of raw sugar for shipments of up to 4 million tonnes of raw sugar. The subsidy was fixed at Rs 3,300 per tonne for February-March. The subsidy amount was calculated on the basis of the exchange rate at that particular time and it was decided that the rate will be reviewed every two months. In April-May, it was cut down to Rs 2,277 per tonne and then again increased to Rs 3,300 for the months of June-July. This move of raising the raw sugar export subsidy was mainly due to depreciation in the Indian currency. The raw sugar export subsidy for August-September was increased to Rs. 3,371 per tonne. The scheme came into execution amidst escalating pressure for sugar export from India due to Rupee depreciation and falling interest among millers who were suffering losses due to a mismatch between selling price and procurement cost. Under the export incentive scheme, India had exported 7.5 lakh tonnes of raw sugar in 2013-14 marketing year (October-September).

According to Indian Sugar Mills Association (ISMA), raw sugar exports from India are just about viable with the incentive. As per the association, the debt burden has more than tripled from Rs.11,443 crore in 2007-08 to Rs.36,601 crore in 2012-13. As on 15th February, 2015, cane price arrears for the current 2014-15 across the country stood at Rs. 12,300 crore.

As per the latest data from ISMA, India's sugar production upto 15th February 2015 stood at 16.708 mn tonnes as compared to 14.528 mn tonnes produced in the same period last year. Thus, there is an increase of 15 percent during the current season as compared to 2013-14 season. India is estimated to produce 26 million tonnes of sugar for current season as against the demand of 24.7-24.8 million tonnes.

Source : Equity Bulls

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