Sugar exports picking up even as delays in release of subsidy loom

In the 2018-19 season, the government had facilitated creation of a 3 million tonnes sugar buffer stock
In some major relief to mills, sugar exports are picking up this season, and opportunities to ship the commodity to newer markets such as Indonesia are being thrown up, with the South-East Asian nation expected to soon open gates for the Indian sweetener. Rising exports, coupled with a sharp decline are useful in clearing the huge glut that industry has been facing the past few years.

Indian Sugar Mills Association (ISMA) and trade leaders are projecting exports to reach 5 million tonnes this season for which the maximum admissible export quantoty, or MAEQ, has been issued mill-wise by the government.

Exporters say that about 1.6-1.7 million tonnes of sugar have been exported from India and about 3.2-3.3 million tonnes of contracts have been signed. At the start of the seaon in October, the  initial realisation for export of raw sugar was Rs 21,000 per tonne against a minimum selling price of Rs 31,000 in the domestic market. But now, exporters are realising Rs 24,000 a tonne. Subsidy declared by the government is Rs 10,480 per tonne.

This means mills in Maharashtra getting Rs 31-32 per kg in local sales, will get an average of Rs 34 a kg on  exports after subsidy.

ISMA said in a note quoting reports available with it, “A few sugar mills have surrendered or will surrender to the government the minimum admissible export quantity, or export quota, that they are not in a position to fulfil. Mills that have not been able to even complete 20 per cent of their quota will be withdrawn from the scheme, and the quota will be re-allocated among others that have exported most of their MAEQs and are willing to export beyond their original quotas.”

The government today issued guidelines on the re-allocation of these quotas.

Knowledgeable circles also said Indonesia has finally decided to open sugar imports from India. The discussion was going on between two countries nearly for the past two years. Indonesia was to educe ICUMSA level to allow Indian mills to export raw sugar. It had kept minimum 1,200 ICUMSA but indian mills don’t produce raw sugar of such a high grade. Sources believe that for Indian mills this grade will be brought down to 500-600. A formal announcement is expected soon.

ISMA also said in a note issued today on current production that there is an estimated global deficit of 8-9 million tonnes in the 2019-20 sugar season, and that Thailand’s exports are likely to decline by 3-4 million tonnes due to lower output there.  Indian sugar exports may accelerate in the coming months, and might be able to achieve more than 5 million tonnes of MAEQ during the entire season against the six million tonnes of MAEQ.”

However, Praful Vithlani, chairman, All India Sugar Trade Association has raised a concern. Subsidies aren't released on time and come with a lag. This adds to working capital cost. Some mills are yet to receive last year’s subsidies. Besides, low cane availability could force several sugar mills in Maharashtra to stop running within a month, while UP mills may do so by mid-April. Mills will not produce more raw sugar after that. Vithlani says, “The export window is shorter. So all industry representatives must decide to take a risk and produce more raw sugar to export it later.”

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