In early 2007, the government had announced a subsidy for sugar exporters till September 2008. However, a clause in the subsidy agreement stated that the subsidy would be discontinued after exports touch the 30 lakh tonne limit, which was breached recently.
The coastal areas of Maharashtra accounted for most of the sugar exports and would be affected by a discontinuation of the subsidy.
The government is defraying the marketing charges, internal transport, handling and ocean freight on sugar exports at Rs 1,350 a tonne for mills located in coastal areas and Rs 1,450 for non-coastal states. India exports white and raw sugar to West Asia and East African countries. It quotes around $330 per tonne for white grade (Ex-Mumbai and Kandla) and $300 per tonne for raw grade sugar.
Some analysts argue that the government's move on scrapping sugar exports could be a result of the rising inflation in the country. Sugar is classified as a essential commodity. Industry players, however, say that sugar was not a major determinant to inflation as there was already a buffer stock of 5 million tonnes. The sugar consumption across the country is expected to rise to 227 lakh tonnes in 2008-09 from 217 lakh tonnes in the current season.
The share price of Maharashtra-based sugar exporter Kesar Enterprises slipped the most. It was down 4.95 per cent at Rs 67.20. Balrampur Chini dipped 4.91 per cent at Rs 95. Bajaj Hindusthan fell 4.78 per cent at Rs 218. Simbhaoli Sugar declined 4.58 per cent at Rs 37 and Triveni Engineering was down 3.81 per cent at Rs 118.