MUMBAI/NEW DELHI: Indian sugar export subsidies will not be renewed before state elections finish next month, trade and government sources said on Thursday, with New Delhi examining the level of subsidy needed to encourage shipments of surplus sugar.

Subsidies are set for one year from Oct. 1. The government has extended the 2019/20 subsidy until December, but in practice exporters will not receive more support as they have already met their 6 million tonne export quota under the scheme.

Failure to set a new subsidy allocation will eventually delay exports from the world’s second biggest producer of the sweetener and support global prices, which are trading near eight-month highs.

The government cannot take a decision until Bihar elections are over next month due to an election code of conduct, said a government official, who did not wish to be identified in line with official rules.

The election process is expected to be finished by mid-November.

In 2018 and 2019, India approved the sugar export incentive before the start of marketing year on Oct. 1 as New Delhi was pushing mills to sell sugar on the international market to clear huge debts they owe farmers for sugarcane.

The export subsidy of 10,448 rupees ($141.86) per tonne helped India export a record 5.7 million tonnes of sugar in the 2019/20 season.

“Most likely, the details of the kind of support mills can get will be announced by mid-November. More or less, it’s going to be like the previous year,” said another government official.

However, a few industry officials feel New Delhi may cut the subsidy for the 2020/21 season as prices have jumped in the world market.

“Tax collection is not rising as expected due to the coronavirus outbreak and expenditure has been rising. This could prompt government to reduce the subsidy,” said a Mumbai-based industry official, who declined to be named.

The government should announce the export subsidy as early as possible so mills can take advantage of higher global prices, said B.B. Thombare, president of the West Indian Sugar Mills Association.

($1 = 73.6475 Indian rupees)

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