Agri Business

Freight ambiguity: It’s lose-lose for sugar refinery, mills

R Balaji Chennai | Updated on December 10, 2019

Not getting sops, mills are unable to supply to EID Parry’s SEZ unit for exports

Owing to an ambiguity in sugar export notification in the current season, one of the two local sugar refineries and a number of sugar mills are losing out on export benefits and significant savings on freight costs.

EID Parry’s port-based SEZ sugar refinery in Kakinada is unable to tap domestic sugar as raw material for exports despite the prevailing surplus, which has hit farmers and sugar mills.

The refinery is importing lakhs of tonnes of raw sugar all the way from Brazil at an additional freight of $15 a tonne.

In the backdrop of the glut in domestic sugar production, the Centre has set a 60-lakh-tonne export target and announced a subsidy of ₹10.40 a kg for the 2019-20 sugar season (October-September). The subsidy includes an ‘ocean freight’ component of ₹2.70.

But the sugar industry is not certain whether the ocean freight can apply for supply to SEZ refineries.

So, domestic sugar mills are unable to sell raw sugar as they may not get the freight component.

Local buying hit

EID Parry’s SEZ refinery has so far imported over six lakh tonnes of raw sugar from Brazil but, unlike last year, it has not been able to buy locally, sources said. In the 2018-19 season, the unit sourced over two lakh tonnes of raw material from various domestic sugar mills, apart from importing about 6 lakh tonnes.

The government had then targeted over 50 lakh tonnes of export and allowed a subsidy of about ₹11 on a kg of sugar, which included about ₹3 in transport subsidy.

Effectively, the EID Parry refinery bought domestic sugar till September 2019 as part of last year’s notification. But it has been excluded from the market in the current season. There are two major refineries in the country — one is EID Parry’s on the East Coast and the other is Renuka Sugar’s refinery in Kandla, a non-SEZ unit on the West Coast.

The notification is clear on the applicability of subsidy to the Domestic Tariff Area, said industry sources. They pointed out that subsidised export is being allowed to support sugar mills’ payment to farmers for sugarcane.

However, lakhs of tonnes of export opportunity is being missed even as the refineries import sugar at a huge freight cost.

Conversely, domestic mills and, in turn, farmers are also losing out on the benefit as they are not able to tap the export opportunity.

Published on December 10, 2019

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