Centre notifies mandatory 4 mt of sugar exports for 2015-16 season

The Centre on Friday notified the mandatory export of 4 million tonnes (mt) of sugar for the 2015-16 season (October to September).

The amount will be divided among the mills based on average production through the last three seasons.

The industry welcomed the move, saying that it will help take pressure of prices by reducing domestic stockpiles. It however, added that it will look to the Government “for help” since current prices were unviable for Indian exports.

“In view of the inventory levels with the sugar industry and to facilitate achievement of financial liquidity, minimum indicative export quotas are being specified for sugar season 2015-16 commencing October 1,” said the notification.

Mills will also be allowed to trade quotas, it added.

A subsidy formula is being mulled by the Centre to facilitate foreign sales in line with the rupee depreciation. The current subsidy scheme of ₹ 4,000/tonne for raw sugar exports, will lapse onSeptember 30.

“A subsidy of ₹ 5,000 per tonne is our calculation but this will be reviewed since the rupee has weakened and sugar prices have begun to firm. It will be announced once the season begins,” said a senior Food Ministry official.

The Indian Sugar Mills Association (ISMA) estimates a carryover stock of about 10.2 million tonnes (mt) from this season.

With sugar output in 2015-16 expected at 28 mt, total supply next season is pegged at 38.2 mt.

Domestic demand is estimated at 25.2 mt, which could leave a surplus of 13 mt next season.

“The decision…to export 4 mt of sugar fixing individual export quotas for each mill will help reduce most of the surplus sugar which has been depressing domestic prices,” said Abinash Verma, Director General, ISMA.

Domestic prices (ex-mill) have slid by ₹ 8-10/kg over the last 14-16 months and the directive — applicable for all grades of the sweetener — should help improve sentiment, Verma said.

Ex-mill prices are hovering around ₹ 2,300/quintal in Maharashtra and about ₹ 2,600-2,650/qtl in Uttar Pradesh.

Importantly, the decision being announced before the season will allow mills to plan production early and make necessary arrangements for production of raw and white sugar.

“Exports are essential at this stage given the large opening stock and if this experiment works then it should improve the price situation,” said Manohar Joshi, Managing Director, National Federation of Cooperative Sugar Factories, who added that tradable quotas will help inland mills. 

If domestic prices do improve on the back of compulsory exports reducing the glut, it could help mills clear dues owed to sugarcane farmers quicker. Cane arrears across India stood at ₹ 14,000 crore at the end of August. 

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