Agri Business

Raw sugar exports stay minimal despite Centre’s sops

Tomojit Basu New Delhi | Updated on January 23, 2018 Published on April 28, 2015

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Domestic manufacturers have not benefited from the Centre’s raw sugar export incentive scheme, according to data provided by the Indian Sugar Mills Association (ISMA). The apex body estimates show that only 91,000 tonnes of a total 1.2 lakh tonnes (lt) having been shipped out since the subsidy scheme was notified last month.

The Government had approved exports of 14 lt at a subsidy of ₹4,000/tonne till September, when the sugar season ends. In the 2013-14 sugar season, around 7.5 lt of raw sugar were exported under the scheme out of a total 12.7 lt. Industry sources said the late announcement by the Centre and the depreciation of the Brazilian Real, had rendered overseas sales unviable. Unlike refined sugar, most raw sugar produced domestically is exported.

“We missed the boat, it’s just that. Exports are insignificant as a result and the reason for that was the dramatic depreciation of the real which saw international prices tumbling. At current prices, exports of raws are unviable,” said an industry official.

The decision to extend the export incentive scheme came at least two months too late and had been settled after estimating global prices at roughly 16 cents/pound which have since fallen to 12.59 cents/pound as of late last week. For a comparison, said another industry source, Brazilian raw sugar is cheaper by almost ₹3,000/tonne.

“As a result, the incentive needs to be at least ₹7,000/tonne. The decision by the Centre came two months too late since around January, when the price was hovering around 16 cents, orders could have been booked,” he said, adding that Indian exporters were also challenged by incentives announced by Thailand and Pakistan.

In addition, crushing operations around the country are set to end soon in Maharashtra, Karnataka and Tamil Nadu, where raw sugar production is undertaken due to the mills’ proximity to ports. “There is no point for a miller in Uttar Pradesh, Punjab or Haryana to produce raws since the cost of transporting to a port is substantial,” said the official.

While an export incentive on refined sugar is unlikely since it would violate World Trade Organisation norms, the Centre is believed to be working on increasing the import duty of sugar to 40 per cent from 25 per cent and creating a buffer stock to reduce the domestic glut with production set to outstrip domestic demand for the fifth consecutive year.

Ex-mill prices in north India are around ₹25/kg, lower than the cost of production at ₹30, according to the industry. As a result of mounting losses, mills owed sugarcane farmers almost ₹20,000 crore as of last month. Domestic output this season is likely to touch 270 lt as per a revised ISMA forecast, while internal consumption is pegged at 248 lt.

Published on April 28, 2015
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