The Hindu Business Line : Maharashtra likely to gain from lifting of sugar ban

Sweet news
Maharashtra mills can net $310-311 a tonne
State has added advantage of low cane price
Realisations may be lower due to drop in global prices

New Delhi , Jan. 12

The complete lifting of the ban on sugar exports by the Centre comes even as world prices have fallen to their lowest in 13 months.

White sugar (London March futures) is now trading at around $325 a tonne, having lost roughly $17 per tonne since the start of the year and down from $480-plus levels of July (when the ban was imposed).

Viability

Traders said right now, exports are viable only for sugar from Maharashtra.

The average cost of transporting and port handling sugar sourced from Kolhapur or Sangli at Mumbai would be $22 a tonne, and $18 from Pune.

Taking an average deduction of $20 from the f.o.b. price of $325 and adding duty entitlement pass book (DEPB) scheme benefit of two per cent, mills in Maharashtra can net $310-311 a tonne (about Rs 1,380 a quintal) from exports.

This is more than Rs 1,350 a quintal they are realising from selling in the domestic market.

Freight charges

Compared with this, the freight and port handling charges for sugar from UP would be at least $30 a tonne, bringing down net export realisation to $300 a tonne or Rs 1,340 a quintal.

This is much below Rs 1,475 a quintal they are making now from domestic sales.

"Anyone planning to export would have to source from Maharashtra. In the coming days, every trader will converge to mills there," sources said.

Moreover, the State had the added advantage of low cane price relative to recovery levels.

"Maharashtra mills have so far only paid the advance instalment of Rs 900 a quintal to farmers, besides forking out another Rs 250 by way of harvesting and transport charges," they said.

"The total cane cost of Rs 115 a quintal works out lower than the Rs 125-130 price in UP. But then, the sugar recovery rate in Maharashtra averages 11.5 per cent against 9.5 per cent in UP."

Revenue streams

The only other State from where exports are feasible is Tamil Nadu.

Although cane costs are comparatively high, leading factories there have significant earnings from cogeneration and other revenue streams that can cross-subsidise sugar exports.

More players

On January 3, the Centre notified a partial lifting of the export ban for companies with re-export obligations against past duty-free raw sugar imports under the advance licence (AL) scheme.

Within a week of the announcement, mills are reported to have contracted shipments totalling over one lakh tonnes at $335-347 a tonne f.o.b. Now, with the total lifting of the ban (to include non-AL holders as well), there will be more players.

Also, realisations may be lower, given the drop in international prices to $325 a tonne.

"We only pray that there will be no delay in notifying the latest Cabinet decision of Thursday, unlike the earlier notification of January 3 that came more than two weeks after approval was granted," the sources said.

As of now, Maharashtra mills have something to smile about, even if it may have come somewhat late.

More Stories on : Sugar | Exports & Imports | Maharashtra

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