(Updates with analyst comments starting in fourth paragraph.)
Jan. 24 (Bloomberg) -- India, the world’s second-biggest sugar producer, will consider subsidizing raw-sweetener exports to ease a domestic glut, two government officials said.
The state will consider a subsidy of 2,000 rupees ($32) a metric ton, said the officials, who asked not to be identified because they aren’t authorized to speak to the media. The government may also look at ways to reduce imports in the next cabinet meeting, they said. N.C. Joshi, spokesman for the food ministry, declined to comment.
The planned incentive is unlikely to spur exports, Michael McDougall, a senior vice president at Newedge Group in New York, said in a telephone interview. Raw-sugar futures slumped 25 percent in New York trading since reaching a one-year high on Oct. 18, amid expanding supplies from leading global producer Brazil to India and Thailand.
“The amount is not enough,” McDougall said. “The impact on the raw-sugar market will be minimal. Global prices will need to rise for exports to happen.”
Raw sugar for delivery in March gained 0.2 percent to 15.07 cents a pound at 10:58 a.m. on ICE Futures U.S. in New York. Refined, or white, sugar for the same delivery month rose 0.3 percent to $406.40 a ton on NYSE Liffe in London.
“The subsidy will be potentially more damaging to the white-sugar market, as Indian refiners will use subsidized raw sugar for refining,” McDougall said.
Indian mills last month sought a subsidy of 3,500 rupees a ton to make raw-sugar exports viable, M.G. Joshi, managing director of National Federation of Cooperative Sugar Factories Ltd., said Jan. 20.
A panel of ministers recommended subsidizing exports of 4 million tons of raw sugar over two years, Food Minister K.V. Thomas said Jan. 16. The food and finance ministries were asked to work out the amount of the payment, he said.
Indian mills aim to increase exports in an effort to trim record losses as cane costs climb and prices drop. Bajaj Hindusthan Ltd. and Balrampur Chini Mills Ltd. were among companies in Uttar Pradesh state that shut mills for two weeks in November, demanding aid to pay state-determined cane prices to farmers.
Sugar production in India may total 25 million tons in the current 2013-14 season, compared with 25.1 million tons in the prior period, according to the Indian Sugar Mills Association. Stockpiles will surge to 10 million tons by the end of 2013-14 if the nation fails to export any sugar, it estimates.
--Editors: Dan Weeks, John Deane