Sugar exports stay largely muted over low prices in international market

With the next sugarcane crushing season slated to begin after Diwali, the sugar exports have largely remained muted on global sugar glut and low prices in the international market.

Owing to the continuing streak of subdued sugar prices internationally, less than 4 million tonnes (MT) or only 80% of the total sugar export quota of 5 MT for 2018-19 sugar season has so far been clocked. 

At present, the ex-mill prices of raw and white sugar in Uttar Pradesh, the country's top sugar producer, stands at nearly Rs 18 per kg and Rs 19-19.5 per kg respectively, depending upon the distance from the Kandla port.

In August 2019, the union cabinet had approved export subsidy of Rs 10.44 per kg of sugar to enable mills ship 6 MT of the sweetener in the next 2019-20 season. The subsidy component is estimated to cost the exchequer Rs 6,268 crore.

Together with the current ex-mill price and export subsidy (to be reimbursed prospectively), the realisation of mills computes to about Rs 30 per kg against the domestic realisation of Rs 32-33 per kg, Indian Sugar Mills Association (ISMA) secretary general Abinash Verma told Business Standard.

"As was earlier expected, the sugar export market has not picked up and the pace of fresh contracts has been rather sluggish," he claimed. However, he added that the mills were still looking at the export markets to offload their excess inventory, since the next crushing season is on the threshold and they need vacant space for fresh stock.

"There is an additional cost for unsold inventory, which adds up to more than Rs 5 per kg at the end of season. Therefore, it would be prudent for mills to contract for the export consignments at the prevailing prices even if it looks a losing proposition now," he noted. 

Meanwhile, UP chief minister Yogi Adityanath today acknowledged the tight liquidity situation of millers owing to low global sugar prices. The state sugar mills are baulked down by farmers’ arrears of more than Rs 4,000 crore.

"The sugar prices in the international market are ruling at Rs 17 per kg. Naturally, the state mills are not able to export the commodity," the chief minister said addressing a farmers’ programme at his official 5, Kalidas Marg residence here. 

Underlining that the central and state governments had supported the industry with export subsidy to overcome the challenging sugar market dynamics, he underlined his government had facilitated cane payments of Rs 76,000 crore after coming to power.

At present, of total sugarcane payables of Rs 33,048 crore for 2018-19 season, more than Rs 4,000 crore are still unpaid by mills, especially the private sector operated.

Recently, UP sugarcane development and sugar industries minister Suresh Rana had asserted that the state would ensure 100% settlement of arrears by the end of October.

In 2018-19, total 119 state mills, including 94 private, 24 cooperative and a UP State Sugar Corporation Limited (UPSSCL) mill, had participated in the crushing operations. The sugar output stood at 11.8 million tonnes (MT) compared to 12 MT in 2017-18. This year, the state government has projected 121 mills to crush.

So far, the state has filed first information report (FIR) against sugar mills owned by Simbhaoli and Modi groups for defaulting on cane payments. The action was taken under section 3/7 of Essential Commodities Act (ECA) 1955, according to UP cane commissioner Sanjay Bhoosreddy.

Besides, action was also being contemplated against other mills for their slow payment ratio even as the 2019-20 crushing season is merely 10 days away. The operations would begin from Western UP and slowly progress towards the Eastern region.

More than 50 UP mills had settled their cane liabilities, including units belonging to Balrampur, Birla, Dalmia, Triveni, DSCL etc, and 33 others had notched up payment percentage of over 80%