The Hindu Business Line : Dubai refinery signs deal for buying raw sugar

Sweet features
Raw sugar exports could help at a time when there is a glut in white sugar.
The deal means there is a firm commitment for Indian sugar next season.

Chennai June 5 For the first time, raw sugar will be exported from the country. Indian Sugar Exim Corporation (ISEC) Ltd has signed a deal with Al Khaleej refinery of Dubai to export it in bulk.

When contacted, Mr S.L. Jain, Director-General of the Indian Sugar Mills Association (ISMA) and ISEC committee member, refused to divulge details on the quantity and the price at which raw sugar has been sold.

Agency reports from London, however, quoting Al Khaleej officials put the deal at between one and two lakh tonnes and the price at $270 a tonne c&f. Indian traders put the deal at Rs 930 a quintal ($230/tonne f.o.b).

Delivery schedule

Mr Jain said raw sugar exports would be the only saviour for the Indian sugar industry, which is facing a glut situation.

Asked about delivery schedule, he said it would be done from the new season beginning October. This could mean that the actual receipt of the shipment by the stand along refinery, the biggest in West Asia, could take place between December and February.

Mr Jain said only seven lakh tonnes of the total 16-17 lakh tonnes of white sugar cleared for exports had been shipped. "That is why we feel raw sugar exports will save us," he said.

More exports

Stating that more exports of raw sugar could take place, Mr Jain, without providing details, said ISEC was looking at a few more destinations. "We are happy that we have got a destination for our raw sugar in the Indian Ocean," he said.

Direct to refinery

A feature of the sales by ISEC is that it has been made direct to the refinery. "No trader has been involved in this deal," he said.

Asked if ISEC had approached the refinery, he declined to comment.

Trade sources hinted that ISEC had approached the refinery, saying: "No buyer will come forward without the seller approaching. Also, the buyer will need material."

According to analysts, selling raw sugar makes sense since the market for white sugar in the country is limited, especially in view of mounting stocks. Carryover stocks at the end of the current season are projected at over 100 lakh tonnes.

Also, Indian sugar exported is of 80 ICUMSA and above. ICUMSA is the international unit for expressing the purity of the sugar in solution. This is directly related to the colour of the sugar.

"For exports, India needs to export sugar of 45 ICUMSA. Only two or three mills are capable of refining it in the country. And there is a huge demand for sugar with 45 ICUMSA in Europe and other western countries," the sources said.

Raw sugar exports will give refineries abroad the choice to produce sugar according to their clients or market needs.

Ex-mill price

Trade sources said while ex-mill price for raw sugar is currently Rs 9,300 a tonne, while that of white or refined sugar Rs 9,900. "Mills can gain Rs 500-600 a tonne by selling raw sugar," the sources said.

Raw sugar, which is light brown in colour, undergoes minimum processing.

Referring to the Al Khaleej deal, they said beginning of shipments from next season meant there was commitment to buy Indian sugar.

"This could mean that inventory build up can be restricted to an extent," they said.

ISEC is a body floated jointly by the private sector ISMA and National Federation of Sugar Cooperative Factories Ltd. It undertakes exports on behalf of the sugar industry.

According to Mr Jain, the exports are being made under open general licence. The exports also come on the heels of the Centre clarifying that raw sugar shipments would be eligible for the Rs 1,350 a tonne subsidy.

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