MUMBAI: Sugar exports, estimated at 3.8 MT for SS 2019, are expected to rise to 4.5-5 MT in SS 2020, given the lump sum export subsidy announced.

For SS 2019, the Government had granted raw material subsidy of Rs 139 per tonne of sugarcane for sugar exported, along with a transport subsidy of Rs 1,000-3,000 per tonne of sugar, depending on the distance between the exporting sugar mill and the nearest port. These subsidies together worked out to Rs 2,300-4,300 per tonne of sugar exported.

The subsidy provided for SS 2020 is way higher, at a whopping 10,440 per tonne. In spite of this, CRISIL Research believes it may be hard to achieve the export target of 6 MT as international sugar prices are expected to remain weak due to high global inventories.

The Cabinet Committee on Economic Affairs has given its approval for providing a lump sum export subsidy of Rs 10,448 per tonne of sugar to mills for sugar season (SS) 2020, or from October 2019 to September 2020.

The move entails a total estimated expenditure of Rs 6,260 crore.

“Additionally, a 20% rise in exports is expected to lead to inventories declining, triggering a rise in sugar prices. CRISIL Research expects sugar prices to rise ~8% to Rs 33-34 per kg in SS 2020 through September 2020,” said a research note from Crisil.

Posted By Daily Shipping Times.