The downtrend in global raw sugar prices on higher production in Brazil is posing a fresh set of challenges for Indian sugar exporters. This is at a time when millers, ahead of the crushing season, keenly await the Government’s decision on export subsidy for October and November.

In order to make raw sugar shipments viable in the world market, the Government will have to hike the export subsidy given to millers substantially, industry sources said.

At the current international rate of around $320 a tonne, the Government may have to hike the subsidy to around ₹6,000 a tonne to make raw sugar shipments viable. For August and September, the Government had fixed the export subsidy at ₹3,371 , but hardly any shipments are happening now.

“There are no buyers in the international market now. Even the forward deals are not happening this year,” said a Kolhapur-based merchant exporter. Risk-averse buyers want the crushing season to start before entering into new contracts.

Cane crushing for the upcoming season is set to begin next month in Maharashtra – one of the largest producers – while it has already started in southern Karnataka.

Export incentive Millers in poll-bound Maharashtra are keenly looking forward to the indication from the Government on continuation of the export subsidy and also a possible hike in the quantum of the subsidy to plan their production schedule.

Early this year, the Manmohan Singh Government decided to provide export incentives for shipment of up to 40 lakh tonnes of raw sugar between February 2014 and September 2015, i.e., until the end of 2014-15 sugar year.

The incentive was aimed at lending stability to sugar prices by shipping out the excess stocks. Opening stocks for the coming season starting next month is projected to be around 7.5 million tonnes.

Of the 16.74 lakh tonnes of raw sugar produced in the current season, some 12.25 lt have been exported.

Trade sources said any increase in export subsidy may further impact domestic sugar prices that are already in the grips of bears due to surplus stocks and expectations of higher output.

Ex-factory prices in Maharashtra are hovering around ₹2,800 a quintal, while in UP it is around ₹2,950-3,050.

Massive debt Meanwhile, the reported direction to UP millers by the Allahabad High Court to clear cane arrears by liquidating their stocks by October 31 may have an effect on prices.

UP millers, who are holding about 2.75 million tonnes of sugar, owe about ₹4,600 crore to farmers in the State.

Food Minister Ram Vilas Paswan said on Wednesday that the Centre will not intervene on the payment of sugarcane arrears and asked the State Government to ensure that dues were settled.

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