The Hindu Business Line : Sugar mills dub move to allow import as `illogical'

Bitter scenario
Landed cost could be Rs 23-24 whereas domestic price is Rs 18 a kg.
Importers will also face a 10 per cent levy commitment for PDS.
Prices seen firm at current level; pick up seen in August.

Chennai , June 23

The Centre's decision to encourage sugar imports to control prices is `illogical,' say sugar mill representatives and traders.

Sugar in the domestic market is cheaper than in international markets and, therefore, imports would neither happen nor serve the purpose. Also, while the Government expects sugar to come in, the industry is faced with an obligation to totally export over 20 lakh tonnes this season and the next.

Bouyancy after years

The decision to do away with import duty on sugar to encourage arrivals has had little or no impact on prices in the domestic market. There has been no significant price change on Friday though orders have slowed. Things will be back to normal in a day or two, say industry sources.

Mr N. Ramanathan, Director, Ponni Sugars (Erode) Ltd, pointed out that buoyancy in sugar comes after several years of low prices. This has helped support sugarcane prices - nowhere in India are farmers making less than Rs 1,100 a tonne. Sugar production has also increased with projections of 190 lakh tonnes this season and more than 200 lakh tonnes in 2006-07.

Sugar mills in all the major sugar producing States were making significant investments, he said. After a gap of several years, it is only now that sugar industry is expanding.

Traders point out that at the existing price levels, landed cost at port would be Rs 23-24 a kg and they would still face transport costs, whereas domestic prices rule around Rs 18. If the Government is serious about imports, it should subsidise it at about $100 (Rs 4,500) a tonne.

Levy commitment

Mr Ramanathan said the importers would also face a 10 per cent levy commitment for the public distribution system - for instance, in Tamil Nadu the levy price is Rs 13.30 kg - which would add another Re 1 a kg to their cost.

Despite the Government's effort, sugar millers believe that sugar prices will continue to rule at current levels and pick up after August when the year-end festival season demand starts. The prices here are linked to global trends and the situation reflects the international trend.

In the south, ex-factory sugar prices ranges around Rs 18 a kg, in Maharashtra, prices on Thursday ruled around Rs 17.30. Industry representatives say sugar prices would increase in August when festival demand starts. Prices are likely to remain buoyant during the whole of 2007 and it is only during the 2007-08 season that a turning point may be expected.

According to one assessment by the industry, there is not likely to be a slump in prices till there is a stock build up of more than 60 lakh tonnes bySeptember end. Based on projections, this is expected in 2008 or 2009.

Lack of consensus

As of now there is no consensus on closing stocks and opening stocks estimates - the last official figure was 116 lakh tonnes in September 2003 when sugar releases were tightly regulated.

After that due to a slump in production and sugar mills going to court to get around the monthly sugar release mechanism, stocks have depleted and available numbers are unreliable. Now the industry estimates that as of September end, after allowing for consumption the stock would be about 35 lakh tonnes bynext season. With the annual escalation in production industry estimates that by 2008 or 2009, the stock levels would build up enough for prices to go down.

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