India's cabinet on Wednesday decided to give financial incentives for export of raw sugar to domestic mills, a decision that may push up global supplies and reduce near-term prices of the sweetener.
The government would give 3,333 rupees ($54) per ton on exports of raw sugar to compensate domestic millers buying cane from farmers at high state-fixed prices, but the cabinet would review the amount of incentive after a couple of months, a senior government official, who declined to be named, told The Wall Street Journal.
The industry has been saying they need such an incentive to enable them to ship out excess stocks.
Global traders have been closely watching the Indian government's plan to offer cash incentives for exports of raw sugar. India is the world's second-largest producer of sugar after Brazil.
The government will offer the cash incentive on exports of up to 4 million metric tons of raw sugar.
Indian sugar mills are stuck with piles of sugar after a bumper crop as domestic prices have dropped below the cost of production in the past year.
The Indian Sugar Mills Association said in a statement that it welcomed the government's decision in helping them dispose off 4 million tons of surplus sugar.
"This will give some of the much required liquidity to sugar mills," it said, adding that the move help them pay dues to cane growers.
Local sugar prices have fallen about 15% to 26,500 rupees ($426) per ton in the past one year due to a supply glut and mills have been struggling to pay the cane purchase price to the farmers.
Source:- online.wsj.com
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