Two key decisions taken by the Union Government to help the sugar industry have buoyed the commodity’s exports and meet the shipment target of six million tonnes (mt) for the current season (October 2020-September 2021)
“By March 15, we have signed contracts to export 4.3 mt and by April-end, we could sign deals to export 4.6 mt,” said Rahil Shaikh, Managing Director, MEIR Commodities India.
“Everything is currently fine on the export front,” said Praful Vithalani, President, All-India Sugar Traders Association (AISTA).
Upbeat on exports
Indian sugar industry is upbeat on exports, despite a drop in global prices for the commodity, mainly because of the two key decisions taken in mid-February.
“One, the Centre allowed swapping of sugar releases for the domestic market with the export market,” said Shaikh.
As a result of this policy, Maharashtra sugar mills gave their domestic market release quota to Uttar Pradesh mills. In turn, the Uttar Pradesh mills gave their export market release quota to their western counterparts.
“It allowed at least 0.7 mt of more sugar for exports. It also helped Indian sugar millers to cash in on the higher prices in the global market then,” said the MEIR Commodities India Managing Director.
Sugar mills continue to face liquidity crunch
The Indian Sugar Mills Association (ISMA), a body of private sugar mills, said in a statement earlier this month that the swapping of quotas permitted by the Centre had received a positive response with 0.47 lakh tonnes reallocations done by March 15.
Maharashtra and Uttar Pradesh mills gain from this since the later incurs additional charges to transport sugar, while the former has an advantage being close to the ports.
The second policy of the Centre that helped the sugar industry was permitting raw and white sugar exports to refineries special economic zones (SEZs).
ISMA said that the decision allowing supply to SEZs and considering them as export was also covered by the scheme to provide assistance to sugar mills.
“Both these schemes have brought in additional liquidity to the industry. As a result, we now expect exports to top 5.5-6 mt against initial estimates of five mt,” said Shaikh.
“We are on track to achieving the six mt sugar export target this season. We are confident we will achieve the target,” said Vithalani.
‘A great achievement’
ISMA said the signing of 4.3 mt of sugar for exports was “a great achievement” as the deals were struck within two-and-a-half months after the Centre allocated export quotas on December 31.
The export deals were made well before a downtrend gripped the global commodities market in which sugar prices were also pulled down. Prices have declined mainly since speculators and fund managers cut their positions in various commodities, including sugar.
Sugar prices under check on muted demand
At one point of time during January-February, non-availability of shipping liners and containers was expected to affect sugar exports. But with the signing of these deals, the fear has been overcome.
Sugar prices are currently lower by nearly two per cent since the beginning of the year. Month-on-month, the commodity has declined 6.29 per cent, according to the Trading Economics website.
Raw sugar prices, which had topped 17.41 cents a pound (over ₹28,375 a tonne) in the third week of February, are currently quoted at 15.19 cents (₹28,100 ) in New York.
White sugar, which ruled at $480.30 (₹35,000) a tonne in the second week of February, is now ruling at $437.10 (₹31,750) for delivery in May.
“We are offering raw sugar at $400-405 (₹29,050-29,400) a tonne and white sugar at $410-415 (₹29,775-₹30,150) a tonne,” said MEIR Commodities’ Shaikh.
“The macro picture is bad with funds pulling out but the fundamentals in sugar are strong,” he said.
The International Sugar Organisation, in its quarterly outlook, has raised the sugar deficit during the current season to 4.782 mt. It has also projected end-season stocks lower by 4.91 mt.
“Currently, Indian exporters are quoting higher prices as they have committed too much for shipments. At the most, we can export another 1-1.5 mt of sugar,” said Shaikh.
Sugar exports to cross 5 mt this year
This is since the Centre’s scheme to provide assistance for sugar exports is up to six mt only. In December last year, the Centre announced an assistance to the tune of ₹3,500 crore this season for sugar exports.
The scheme provides for an incentive of ₹6,000 for every tonne of sugar exported. This is against an average incentive of ₹9,750 crore that sugar mills got last year with the Centre spending ₹6,300 crore.
It helped in exporting 5.7 mt of sugar last season.
Provides liquidity
Sugar exports are key to the industry’s fortunes since it provides liquidity and helps clear dues to farmers for supply of sugarcane to them.
During the current season, the dues are reported to be around ₹20,000 crore, though no official figures are available yet.
The industry’s liquidity has been affected by huge carryover stocks it has been carrying. It carried 11 mt from the last season to the current one.
ISMA is estimating the carryover stocks from this season at 8.9 mt.
This is because sugar production is estimated higher at 29.9 mt by AISTA and 30.2 mt by ISMA compared with last season’s 27.40 mt.
“Domestic consumption this season will be 25 mt with the growth in demand being flattish to a tad higher,” said Shaikh, adding that summer demand is yet to be seen for sugar.
AISTA’s Vithalani said Maharashtra mills are facing problems due to the minimum sale price (MSP) fixed by the Centre for sugar.
“The MSP is the same all over India, but Maharashtra mills are affected since their production costs are higher,” said Vithalani.
Maharashtra mills are getting lower than ₹3,200 a quintal for their sugar, making it difficult to sell at the MSP of ₹3,300 a quintal.
Source : The Hindu Businessline
