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Sugar to Become a Bitter Pill

Sugar may become just a little more expensive for the average customer like you and me. The government claims that the country is sitting on mounds and mounds of sugar which is the result of five continuous years of suhttp://www.firstpost.com/india/ccea-to-consider-subsidy-on-raw-sugar-exports-on-friday-1377583.htmlrplus output. This has depressed prices in the local market and is also reportedly causing a strain on the finances of the sugar mills.

Now it is proposed that the government could increase the subsidy being paid to the sugar mills to about Rs. 4,000 per tonne. The government is now looking to reduce stockpiles and the recent proposal will be sent to the Cabinet for approval. This was reported by a news agency Reuters, who claims to have received the information from two separate government sources.

India is the world’s second largest producer of sugar, just behind Brazil. In the quarter ended September, India paid a subsidy of Rs. 3,300 per tonne to produce sugar and export it. India has also failed to find a market for its sugar export in the face of weak global prices. The global benchmark for sugar, the New York Raw Sugar Futures, is trading very close to the four year low, which itself was recorded in September 2014. Now the sugar mills are claiming that with the proposed increase in subsidy, they may just be able to sell the raw sugar to standalone refineries in Asia and Africa. In the current global scenario of weak sugar prices, continuing the existing subsidies alone will not suffice.

It is expected that the increased subsidy supported by a little rise in global prices may well help sugar producers to clinch export deals overseas. After continuously falling for four years, world sugar prices have perked up a bit and after so many weeks of continuous losses, sugar prices in India too picked up a bit to reach 461 dollars. It gained two and a half percent in the first week of this year. In the last quarter of 2014, the production of sugar in India stood at seven and a half million tonnes, which is about a quarter higher than the previous year. This is because the crushing of sugarcane started a whole week earlier in Uttar Pradesh. Uttar Pradesh is the largest sugarcane growing state in India.

The Maharashtra Chief Minister Devendra Fadnavis has also met the Food Minister two days ago and requested for the continuation and increase in export subsidy for sugar. This would help the sugar mills clear arrears to the sugarcane growers. It has also been reported that the Food Minister gave assurances to the delegation from Maharashtra that their demands would be looked into and solutions for short term implementation and long term implementation would be taken soon. The proposal was under the active consideration of the Central Government and a Cabinet decision was expected soon. The sugar exporters and cane growers may have reason to smile, but will it be a bitter pill for the average consumer?

Atreyee Roy (have 690 posts in total)

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