Sugar prices may rise by 10 pc by Sep on export subsidy:Crisil

Sugar prices are likely to rise over 10 per cent by September this year on the back of the government's decision to give export subsidy on raw sugar with a view to bail out the industry, Crisil said today.
"The government's decision to give a subsidy of Rs 3.33 per kg on exports of 4 million tonnes (mt) of raw sugar over the next two years will reverse the trend of falling domestic sugar prices and provide some respite to the manufacturers," CRISIL Research said in a statement.
Yesterday, the Cabinet Committee on Economic Affairs (CCEA) approved Rs 3,333 per tonne subsidy on raw sugar exports.

The research outfit said the expected 1.5 MT decline in sugar production in the current sugar season (October-September) due to lower cane output, could also support sugar prices.
"CRISIL Research expects ex-mill (Maharashtra) sugar prices to increase from Rs 26 or so currently to Rs 29 per kg by the end of the season - a jump of over 10 per cent," it added.
The growing disparity between sugarcane and sugar prices has severely affected domestic sugar mills in the last couple of years.

As many as 29 sugar companies, together accounting for a quarter of domestic production, had posted net losses of Rs 1,800 crore in 2012-13, mainly because of high cane prices and high interest costs.

These losses are expected to worsen in the current season as domestic prices have declined a further 16 per cent in the first four months of the current season and are currently at a 27-month low, CRISIL said.
Despite significant inventory levels at the beginning of the 2013-14 season, CRISIL pointed out that mills were unable to export since the export realisations were Rs 2-2.5 per kg lower than domestic prices due to weak international prices.
"With the export subsidy, nearly 1.5 MT of sugar is expected to be exported in the 2013-14 season. This, coupled with a 1.5 MT year-on-year fall in domestic production due to a likely decrease in cane output will result in a decline in inventory levels.

"This, in turn, will lead to a Rs 2-3 per kg increase in sugar prices by September 2014," CRISIL Research Director - Industry Research Rahul Prithiani said.