InvestorQ : Does the government plan to give sugar subsidy in this year also and what does that mean for companies like Balrampur, Dhampur, Dwarikesh and Dalmia Sugars?
Dawn Cherian made post

Does the government plan to give sugar subsidy in this year also and what does that mean for companies like Balrampur, Dhampur, Dwarikesh and Dalmia Sugars?

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Mitali Bhutta answered.
1 month ago
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Export subsidy for sugar has been a contentious issue, both domestically and globally. In the international sugar market, countries like Brazil and Thailand have already complained to the WTO that India was not sticking to the WTO agreement by offering sugar subsidies to make up for the higher cost of funds and make Indian sugar globally competitive.

For the government, it has been a politically sensitive topic and they also need to avoid sugar prices crashing in India as it would impact the payment of dues to sugarcane farmers. Hence, the Cabinet is currently considering a proposal to provide export subsidy worth Rs.3,600 crore to sugar mills for 2020-21.

Sugar companies in India follow a sugar cycle year which extends from October to September. In the previous sugar cycle 2019-20, the government had given subsidy pegging sugar at the price of Rs.10,448 per ton. This resulted in a sugar subsidy payout of Rs.6200 crore. Comparatively, this year the sugar subsidy is lower at Rs.3600 crore.

The Rs.3600 crore subsidies in the sugar cycle year 2020-21 will be for export of 6 million tons of sugar during 2020-21. In 2019-20, sugar mills managed to export only 5.7 MT of sugar as compared to the mandatory quota of 6 MT. In the current cycle, Indian government will look to complete the entire quota.

India needs to desperately reduce sugar inventories as that are putting pressure on prices. It needs to be seen how the lower incentive allocation is helpful in achieving this target.

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