The National Federation of Cooperative Sugar Factories (NFCSF) on Friday asked its members to export the entire quota allocated by the government and not withhold stocks in anticipation of rise in prices in the coming season.

The government has made it mandatory for mills, both private and co-operatives, to export four million tonnes of sugar in the 2015-16 season (October-September) in order to sell surplus stocks in global market and improve cash flow of the millers for making sugarcane payment to farmers.

India has surplus sugar stock on account of bumper production in last five years, depressing local prices.

“Sugar export under the Minimum Indicative Export Quota (MIEQ) scheme is mandatory, failing which the mills shall be deemed to be violating the directives of the government. We would, therefore, urge the member factories to cooperate with the government in its initiative to improve the financial liquidity of the sugar industry through liquidation on surplus stock by way of fulfilment of quota obligations and participation in supply of ethanol to OMCs for blending in petrol as early as possible and take advantage of the production subsidy,” NFCSF said in a statement.

Stating that the market sentiments have improved in the last six months on likely decline in production in 2015-16 season, the Federation said, “In anticipation that sugar prices in the coming season would go up, Indian sugar mills have started holding sugar than to export.”

Many sugar mills are focussing more on domestic sales thereby delaying their export obligation. “More and more sugar exports will help in reducing the sugar stock, which has started depressing the domestic prices. If domestic prices of sugar will improve on compulsory exporting sugar, it would help mills to clear their cane price dues to farmers.”

Mills have so far exported only 0.92 million tonnes (mt) of sugar, it said, adding that “if sugar export does not speed up, industry will not be able to achieve the target of MIEQ and the 2015-16 season will close with higher sugar stock“.

Sugar production in India, the world’s second biggest producer after Brazil, is expected to decline to 26 mt in 2015-16 season against 28.3 mt in the previous year.

However, the total availability this season is pegged at 35.1 mt, which is much higher than the domestic demand of 25.8 mt.

Reuters adds: Analyst FO Licht sees a smaller global sugar deficit of 1.5 mt in 2016/17, due in part to a projected increase in EU output, compared with a 6.5-mt-deficit in 2015/16, according to data made available to Reuters on Friday.

Analyst Stefan Uhlenbrock said the 2015/16 deficit forecast of 6.5 mt had been raised from an earlier forecast for a 5.2 mt deficit, due to downward revisions to the crop outlook in Thailand and India.

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