The Hindu Business Line : Sugar position unclear as opening stock figures vary

According to the Centre, the opening inventories as on October 1 stood at 105 lakh tonnes (lt), which is corroborated by the Central Excise authorities. But according to the Indian Sugar Mills Association’s (ISMA) agenda notes circulated at its annual general meeting on December 22, the figure was way lower at 80.72 lt.

Matters a lot

The difference of nearly 25 lt would matter a lot in the present context where the industry is divided on whether or not to liberalise the current norms governing duty-free imports of raw sugar under the advance licence (AL) scheme.

If one goes by the Government’s estimate of opening stocks (105 lt) and its projection of output (originally 220 lt and subsequently revised downwards to 205 lt and now to 190 lt), the total sugar availability during the 2008-09 season would be 295 lt.

With domestic consumption placed at 230 lt and an estimated re-export obligation of 8 lt against past issue of ALs, the season will close with stocks of just under 60 lt. This is equivalent to about three months’ domestic consumption requirement.

Imports needed?

But if the ISMA opening stocks estimate of 80.72 lt are taken, the current season would close with only around 33 lt.

This will not be enough to even last through the first two months of the new 2009-10 season, when mills produce very little sugar (crushing operations really take off only from late-November).

The closing stocks would be lower still if production dips even lower than 190 lt (a possibility not ruled out given current cane crushing and sugar recovery trends), though it could be offset by domestic consumption falling below 230 lt (which, some believe, to be on the higher side).

So, it all boils down to how much sugar the mills held when the season began. Which figure is correct — the Government’s 105 lt or ISMA’s 82.72 lt? If it is the former, then imports may not be really required.

If the latter is true, then the Centre may have to sooner or later liberalise imports.

Huge difference

On the face of it, the Government’s estimate is more authentic, as it is derived from Central excise records. But cynics claim that the excise authorities need not always report the right picture.

“Mills hold their stocks both in bonded warehouses within their premises as well as outside the factory. The excise officials can verify the exact stocks lying inside the mills, but how can they monitor the sugar supposedly stocked outside and on which duty has already been paid? In this case, they have to go by whatever the millers say, though in actuality the factories would have already sold the so-called stocks without even getting the Government’s release orders,” said an industry watcher.

‘Not justified’

Those not reconciled to this view, however, counter that even if the excise records do not provide the absolute correct position of stocks, it cannot justify a difference of 25 lt. “One can understand the 105 lt number being 100 lt or 110 lt, but not 80 lt,” they point out.

Incidentally, for the 2007-08 season too, the Centre’s estimate of the opening stocks, at 110 lt, was above the corresponding ISMA figure of 92 lt. ISMA estimated production at 263.28 lt, domestic consumption at 225 lt and exports at 49.56 lt, leaving closing stocks as on September 30 at 80.72 lt. The Centre’s estimate of domestic consumption for 2007-08 worked out slightly lower at 220 lt.