Commodities

Sugar exporters contract 52 lakh tonnes for shipments, 33 lakh tonnes shipped out

Subramani Ra Mancombu Chennai | Updated on April 23, 2021

Vietnam buying smaller quantities from India, say traders

Indian sugar exporters have contracted to export 52 lakh tonnes (lt) of the commodity till now and could well be on the way to ship out more than the 60 lt target set for the current season to September.

“We have contracted 52 lt of sugar for exports till now. We have to see if we can export more than the targeted 60 lt for this season,” said Praful Vithalani, President of All-India Sugar Traders Association (AISTA).

The sugar industry has set the 60 lt target in view of the Centre extending Rs ₹3,500 crore as assistance for sugar exports this season. This provides for an incentive of ₹6,000 for every tonne of sugar exported from the country.

Last year, sugar mills got an average incentive of ₹9,750 a tonne for exports, with the Centre spending ₹6,300 crore totally. It helped them export 57 lt.

Incentives are necessary for exports since domestic sugar prices are higher than global prices. Sugar mills require the assistance as it helps them to clear the dues to growers who supply them cane for crushing. Dues to farmers from sugar mills is reported to be over Rs 20,000 crore so far this season.

“Though we have contracted 52 lt for exports, physically 33 lt of sugar have been exported,” said Rahil Shaikh, Managing Director, MEIR Commodities India.

“We can definitely ship 60 lt of sugar with the assistance provided by the Centre,” he said.

According to the Indian Sugar Mills Association (ISMA), Indian exporters have contracted these quantities in a short period of less than four months. The Centre had come out with the export policy for sugar exports only on December 31 for the current season that began on October 1.

ISMA said that 48 per cent of the sugar exports were headed to Indonesia and Afghanistan.

“We have been exporting raw sugar to Indonesia, Bangladesh and Dubai. White sugar has been shipped to Afghanistan and Sri Lanka,” Shaikh said.

Indonesia has turned out to be the largest buyer of Indian sugar this year, he said, adding that shipments to Iran, a major buyer last season, have been reduced to only a couple of parcels.

Iran bought a record 14 lakh tonnes of sugar last season but this time, its payment problems have proved to be a hurdle. Tehran has run out of money that it had in an escrow account in which India had deposited the dues for the crude oil it bought from the Islamic republic.

Trade sources in Chennai said that sugar shipments were also heading to Vietnam now.

“Vietnam may be buying a small amount,” said Shaikh.

Vithalani said details of the Vietnam purchase were awaited, while AT Mohan of Chennai-based brokerage firm M.A.T and Sons said that probably Karnataka-based mills could have got the order.

“No mill from Tamil Nadu seems to have got this. Mills from Karnataka ship their consignments from Chennai rather than Mangalore. One of them could have got it,” Mohan said.

“This year, we can sell beyond the 60 lt export target as the sugar market is expected to stay firm. We would be able to ship sugar even without export assistance,” he said.

His view stems from the recent developments that have seen sugar prices rise 3.3 per cent in the past week and 9.66 per cent the past month.

Raw sugar futures have increased sharply this week to a seven-week high as funds have gone long on sugar amidst prospects of a lower crop in the European Union and Brazil.

Currently, raw sugar futures on the International Continental Exchange (ICE) are traded at 16.92 cents a pound (Rs 28,200 a tonne).

“We are selling raw sugar at 125-130 cents over New York prices. Currently, we are offering raw sugar at $410-411 (Rs 30,725-30,800 a tonne). White sugar is offered at $415 (Rs 31,100) a tonne,” said MEIR Commodities’ Shaikh.

“We should be able to sell even if domestic prices top Rs 32,000 a tonne,” M.A.T and Sons’ Mohan said.

“This year, the Union Government’s policy and the world market has supported us,” Shaikh said.

“The Centre’s support would benefit the industry a lot. But lack of unity among the mills has resulted in sugar being sold lower than the minimum sale price of Rs 31 a kg,” Mohan said.

Though the mill's invoice showed that sugar was sold at the floor price, they allegedly resorted to paying the difference between the actual sale price and invoice rate in cash.

The Maharashtra government has been reportedly considering internal transport subsidy to help the mills in the State to sell sugar in other parts of the country. A decision was expected last week but no development took place.

“The Maharashtra Commissioner of Sugar sent the proposal to the State Government. It is held up there,” said AISTA’s Vithalani.

Sugar exports this season have also been helped by two key decisions of the Union Government. First, the Centre allowed swapping of sugar releases for the domestic market with the export market.

As a result of this, Maharashtra sugar mills gave their domestic market release quota to Uttar Pradesh mills. In turn, the Uttar Pradesh mills gave their export market release quota to their western counterparts, allowing seven lt of sugar for exports.

Second, the Centre permitted raw and white sugar entry into refineries in special economic zones (SEZs). It said they would be treated as exports and eligible for export incentives.

This buoyed hopes of exports topping 55-60 lt against initial estimates of 50 lt.

Exports will help the industry in tackling the huge carryover stocks of 110 lt from the last season to the current one. ISMA is estimating the carryover stocks from this season at 89 lt.

The higher carryover stocks are estimated in view of sugar production being seen higher at 299 lt by AISTA and 302 lt by ISMA compared with last season’s 274 lt.

Till April 15, sugar production was estimated at 290.91 lt since October 1 compared with 248.25 during the same period a year ago.

Published on April 23, 2021

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