India Approves $173 Million Subsidy for Sugar Cane Growers

  • India seeks to export 3 million tons of sugar in 2015-16
  • Government to encourage mills to produce more ethanol, power

India, the world’s biggest sugar producer after Brazil, will pay 11.47 billion rupees ($173 million) to subsidize part of the cane payments made to farmers as record costs cause losses at sugar mills.

India’s cabinet approved a proposal by the food ministry to pay a 4.5 rupee subsidy per 100 kilograms of sugar cane to farmers in the year that began Oct. 1, Power Minister Piyush Goyal told reporters in New Delhi on Wednesday. The subsidy will be given directly to the farmers who supply cane to mills that will export sugar and produce ethanol, at least 80 percent of a government-set quota, he said.

India is seeking to clear sugar reserves that jumped 21 percent to 9.1 million metric tons on Oct. 1 after production outpaced demand for a fifth year and a slump in world prices slowed exports. The stockpiles are enough to meet the nation’s demand for more than four months. The government in September set an export quota and the nation will keep shipping amid a projected sixth-annual surplus, Abinash Verma, director general of the Indian Sugar Mills Association, said Tuesday.

“If companies are able to export the whole quota that will reduce the excess inventory and improve domestic prices,” said Rohit Agarwal, an analyst with SPA Securities Ltd. in Kolkata. Shares of sugar mills climbed after the subsidy announcement on expectations the incentive will help companies reduce losses, he said.

Balrampur Chini Mills Ltd., the nation’s second-biggest producer, surged 14.8 percent to 82.95 rupees, the highest since June 2014. Shree Renuka Sugars Ltd., the country’s top sugar refiner, climbed 8.1 percent to 17.35 rupees, the highest since December. Triveni Engineering & Industries Ltd. rose 8.8 percent to 37.25 rupees, the highest since July 2011.

Export Plans

India paid 4,000 rupees a ton to subsidize production and export of raw sugar in the year ended Sept. 30, according to the food ministry. Mills are being squeezed by rising payments to farmers and prices that remain too low to cover costs.

India plans to export 3 million tons of sugar in 2015-16, compared with an earlier target of 4 million tons, according to a government official who asked not to be identified citing internal policy. The nation wants its stockpiles on Oct. 1, 2016 to exceed three months’ demand, the official said Tuesday.

While sugar prices in Mumbai have surged 22 percent since the end of June, mills are still losing as much as 5.5 rupees a kilogram on local sugar sales. They have piled up debt of about 510 billion rupees, Tarun Sawhney, vice chairman of Triveni Engineering, India’s third-largest producer, said last month.

The Indian Sugar Mills Association may seek further assistance from the government if local sugar prices don’t improve, it said in an e-mailed statement on Wednesday.

Raw sugar for March delivery fell 2.5 percent to 14.41 cents a pound on ICE Futures U.S. in New York. Prices that slumped to a seven-year low in August have since jumped 42 percent.

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