After lack of orders, govt extends sugar export quota date to December-end

After a tepid response from buyers abroad, the central government has extended the time given for sugar export under the 'Minimum Indicative Export Quota' (MIEQ) by three months, until end-December.    

Issued first on May 9, the government told mills to ensure a combined two million tonnes of sugar export by September 30, on the basis of allocated quantity. The idea was to cut a glut, at the state-set prices, in the home market.  

The latest notification from the ministry of food also said the actual export might be completed in the coming, 2018-19, sugar season (which begins October 1 and goes on until the next September 30). 

Earlier, to ease the way, the government has said it would not be necessary to file the GSTR-3 tax return document, required earlier for export permission. Also, the earlier export quota under MIEQ of 7.14 kg of sugar per tonne of estimated cane crushed was revised to actual crushing or the existing quota already notified earlier in May, whichever was lower. In rupee terms, this amounted to Rs 5.5 per kg of sugar.  


However, even after these benefits, export was unviable at the current low global prices. "Extension of the timeline is a good and timely move. Since raw sugar would be available only after commencement of new-season crushing in October, the MIEQ extension would help mills export raw sugar produced between October and December," said Sanjay Khatal, managing director, Maharashtra State Federation of Co-operative Sugar Factories.

Mills were able to attract orders for only 400,000 tonnes in all. The benchmark Sugar 11 contract on the Chicago Mercantile Exchange reported a decline of 13.3 per cent to trade at 10.13 cents a pound on Thursday, compared to 11.69 cents a pound on May 9, the day of the first MIEQ order issued by the Government of India. 

Also, since May 9, sugar prices have declined by $45 a tonne in the international markets; they are now $305 a tonne. In May and June, mills would have had to lose Rs 7-8 a kg on export; this loss would now be Rs 10.5-11.5 a kg.    

"The government has not changed any export guidelines or offered any new incentives," complained a senior industry official.

The central government has fixed a minimum selling price for sugar at Rs 29 a kg to stop a slide in prices. With an estimated carryover stock in excess of 8 million tonnes (MT) from the current season, sugar production is estimated at 35-35.5 MT for 2018-19, as against 32.25 MT for 2017-18. Home consumption is estimated at 25 MT in a year. 

Export woes

  • Govt allows 2 mt of MIEQ sugar exports for three more months
  • Prices have fallen over 13% since May, when MIEQ was announced for the first time 
  • Exporters have been able to export only 400,000 tonnes so far
  • Further exports unlikely given there has been no change in export rules
  • Exporters anticipate Rs 12-13 a kg loss in MIEQ sugar exports

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