Southern mills relieved over sugar imports

The sugar industry has welcomed the Centre’s calibrated approach to sugar imports — of permitting 5 lakh tonnes of raw sugar, duty-free, through ports in the South and West till June 12.

Given the estimates of overall sugar production and the tight supply situation anticipated, imports are needed.

But, this year, the deficit is spread unevenly, with the shortfall much higher in the South, followed by the West.

Secondly, while sugar output in the coming season is expected to improve in the West and North, in the South, Tamil Nadu particularly, it will continue to see a drop as it is in the third year of a dry spell.

A senior executive in a sugar company said the total production in sugar year 2016-17 (October-September) is pegged at about 203 lakh tonnes. Taking into account the opening balance of about 77 lakh tonnes as of October 2016, and an estimated annual consumption of about 240 lakh tonnes, the stock at the end of the sugar year will be about 40 lakh tonnes. This is just about two months of domestic requirement.

But sugar mills point out that of the 40 lakh tonnes of closing stock, more than half, or about 21 lakh tonnes, is with mills in the North, and about 15 lakh tonnes is in the West. In the South, where all the States except Kerala produce sugar, there is about 4.5 lakh tonnes, which is just about one month’s stock.

It is in this context that the mills in the South and West are relieved that the Centre has allowed imports through specific ports. Of the 5 lakh-tonne imports, 3 lakh tonnes will come in through ports in Karnataka, Andhra Pradesh and Tamil Nadu; 1.5 lakh tonnes in Maharashtra and Gujarat; and 50,000 tonnes via West Bengal and Odisha.

The industry is hoping the Centre will sustain this balanced approach and allow a second tranche of about 5 lakh tonnes later this season to balance the domestic need while not causing a serious dip in sugar prices.

Sugar prices now range around ₹3,700 a quintal (100 kg), up from about ₹3,300 in October 2016. Previously, it had dropped as low as ₹2,200.

Prices then had ruled lower than the estimated cost of production of about ₹3,200-3,300 and this had led to huge sugarcane payment arrears of over ₹20,000 crore to farmers.

Sugarcane payment represents significant revenue to farmers — about 2,100 lakh tonnes at ₹ 2,300 a tonne totals more than ₹55,000 crore.

For the 2017-18 season, preliminary estimates based on sugarcane planting indicate that sugar output could at best increase to about 230 lakh tonnes, with the lion’s share of the increase coming from UP and Maharashtra, which account for more than half the country’s sugar production. The graded approach to sugar imports may have to be continued in the coming season also.

According to industry sources, sugarcane FRP (fair and remunerative price), the statutory price set by the Centre, is bound to increase. Normally, the government announces the sugarcane price in February.

However, it was delayed due to the elections this year. Based on information available, industry believes that the FRP for the coming season could be around ₹2,550 and sugar prices will have to be sustained.