UP mills may have to wait for central subsidy benefits

PUNE: The sugar mills from western India will be the immediate beneficiaries of the central government’s subsidy for raw sugar production while the landlocked mills of the North will have to wait to get the indirect benefit of the subsidy in terms of improvement in domestic white sugar prices. Forthcoming elections to the Lok Sabha are likely to prolong their wait further as the industry does not see sugar prices increasing before the elections.

Most of the raw sugar exports are taking place from Maharashtra, Karnataka and Gujarat. Apart from their location close to the mills, they score over the mills in the North, having lesser cost of production due to higher sugar recovery from the cane.

Rahil Shaikh, MD of the London-headquartered trading company ED and F Man said, “India has exported 4.5 lakh tonne of raw sugar till now. The last traded price of raw sugar was $395 per tonne. The exports are taking place mainly from Maharashtra and Karnataka.”

The CCEA last week approved a subsidy of Rs 3,333/quintal for raw sugar. The subsidy has been calculated on the basis of the exchange rate of Rs 62.44.

The mills from secondlargest sugar UP will mostly get the indirect benefit of subsidy on raw sugar. “Mills from the western part of the country were selling sugar in the north, the east and also in south. The subsidy will help to make space for the mills in the north to sell sugar in domestic market,” said Abinash Verma, director general, Indian Sugar Mills Association (ISMA). However, the mills in UP may have to wait a little longer to get the indirect benefits of raw sugar subsidy. With polls round the corner, industry observers think domestic sugar prices can increase only after April.