The government's move to provide a subsidy on sugar exports will boost India's shipments as exports have been difficult with sugar prices at a 10-month low. The Cabinet Committee on Economic Affairs on Wednesday approved a subsidy worth Rs 6,268 crore for the 2019-20 sugar season (October-September) to export 60 lakh metric tonne of sugar.

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

India is looking at a 28 million tonne of a sugar output, with 14 million tonnes of carry forward stock. India's annual consumption stands at 25-26 million tonnes, resulting in 60 percent of excess sugar.

There is conservation about a bit of export, buffer stocks being created and ethanol is something that will be heard about in coming days but the government's sugar export subsidy was much needed.

Prakash Javadekar, minister for environment and climate change, said that the Cabinet has approved an export subsidy of Rs 10,448 per MT and the subsidy would be directly credited to the farmer's account on behalf of the mills against cane price dues. Any subsequent balance would be credited to the mill's account.

The ensuing sugar season of 2019-20 is expected to commence with an opening stock of 142 lakh MT due to surplus sugar production during the 2017-18 and 2018-19 sugar seasons.

Avinash Verma, director-general, the Indian Sugar Mills Association (ISMA) said: "Six million (60 lakh) metric tonne of exports will not only reduce the surplus sugar inventory next season, but it will also give additional cash flows to the tune of around Rs 18,000 crore, including the subsidy amount. This will help the mills reduce carrying costs and interest burden as also help them pay cane price to farmers on time."

“The next year all the experts internationally are expecting a deficit of about 4 million tonne of consumption overproduction. So, therefore, we expect that the prices should be moving up probably in the latter part of the year from November-December onwards," Verma said separately in an interview with CNBC-TV18.

(With inputs from agencies)

First Published:Aug 29, 2019 1:30 PM IST