Agri Business

Millers blame elections for delay in sugar export notification

Harish Damodaran New Delhi | Updated on April 10, 2011

A bitter sweet scenario for the sugar sector.





The delay in issuing an official notification permitting export of five lakh tonnes (lt) of sugar – despite an Empowered Group of Ministers (EGoM) giving the go-ahead on March 22 – has upset domestic millers.

“We have missed the bus. Even if the notification comes now, it is too late as the May 2011 white sugar contract at London expires on April 15. The subsequent month contracts are trading much lower, which makes exports unattractive”, a miller said.

The May contract on NYSE Liffe settled at $ 699.70 a tonne on Friday, as against the corresponding quotes of $ 651.60 and $ 642.50 for August and October 2011.

elections

The actual reason for the delay in issuing the formal export notification is not known.

One version is that the notification has been sent to the Election Commission, which is still to clear it. But the logic of this is unclear, because out of the four States where assembly elections are being held, only Tamil Nadu is a significant sugar producer. Only its cane growers potentially stand to benefit from exports.

On the other hand, West Bengal, Kerala and Assam are purely sugar-consuming States, so much so that “delaying exports actually influences the electoral outcome to the extent of keeping prices low”, commented the miller.

It also helps that the Ministers concerned – Mr Pranab Mukherjee (Finance) and Mr K.V. Thomas (Food and Public Distribution) – belong to West Bengal and Kerala, he noted.

Re-exports too halted

In fact, it is not just the five-lt exports under open general license cleared by the EGoM that is yet to be notified.

The Food Ministry is apparently not allowing even mills carrying out re-export obligations against past advance licences to extend the validity period of their release orders beyond the month for which they were issued.

Earlier, these extensions were granted automatically.

The miller also mentioned the ‘large' official sugar releases made for March and April. Mills have been allocated a normal non-levy quota of 13 lakh tonnes (lt) to sell in March and 15.80 lt in April, compared with their corresponding last year's monthly releases of 11.70 lt and 12.80 lt. Even for January and February, the releases of 17 lt and 16.23 lt were more than their respective 2010 levels of 11 lt and 12 lt.

“The Centre is in no mood for the slightest increase in sugar prices before the elections”, the miller noted.

prices

So, will prices go up after the polls? “Unlikely, because the big buyers (soft drinks and ice-cream makers) have made most of their purchases. They stock up before the summer, which is when most of their sales take place. Our loss is their gain”, he added.

Ex-factory realisations of S-30 sugar in Maharashtra averaged Rs 2,530 a quintal on Friday, with premium quality M-30 grade fetching Rs 2,570 a quintal.

As against this, mills claim their average production cost at Rs 2,700, translating into a cash loss of around Rs 150 on every 100 kg of sugar sold.







Published on April 10, 2011

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