India’s decision to export sugar likely to bring down global prices

Sugar futures on the International Commodities Exchange (ICE) hit their lowest in more than 2-1/2 years amid growing concerns that India will export its surplus to the world market.

Dealers said prices were pressured by expectations that the Indian government is poised to introduce a subsidy in a bid to make exports to the world market viable. The subsidy would likely spur Indian refiners to export excess white Sugar sooner than previously expected, dealers said, adding pressure on a global market already grappling with excess supplies.

Meanwhile, the government may levy a cess of around Rs1-2 per kg on sugar to create a fund, which can be used to finance measures such as export incentives, officials said.

Prices were also weighed by stronger-than-expected production in Thailand, where cane crushing is under way.

Earlier, the government used to levy a cess of Rs 124 a quintal on sugar mills, which was passed on to consumers. The cess collected went to the Sugar Development Fund – managed by the Food Ministry – for modernisation and expansion of mills. It is not in force any more as most indirect taxes were subsumed under the GST regime rolled out last year.

Currently, retail price of sugar hovering around Rs 37/kg and consumers are used to paying around Rs 40, the official said.

The sugar industry, which is grappling with higher production, has been seeking export-linked subsidy on cane to help lift prices that have fallen by over 15% since the beginning of the season in October.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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