Government tweaks guidelines to ensure sugar exports meet the target

Though sugar export has picked up this season, with further scope for growth as Indonesia is expected to soon open the doors for Indian sugar, it is still expected to miss the government target.

This prompted the government to issue new guidelines directing the reallocation export quotas from mills that haven’t been able to use them to those that have asked for higher quotas.

In a circular issued on Tuesday, the government warned mills that were not able to utilise their export quotas and don’t surrender or relinquish them that “such mills will not be entitled for their claims for third and fourth quarters for the sugar buffer stock they are maintaining”. The claims are for incentives given for maintaining buffer stock.

According to the Indian Sugar Mills Association (ISMA), a few mills have surrendered or will surrender minimum admissible export quantity (MAEQ) or exports quota that they cannot fulfill to the government.

ISMA and traders have estimated that exports would be about 5 million tonnes (mt) this season, against 6 mt of MAEQs issued by the government. Exporters say that about 1.6-1.7 mt have been exported and about 3.2-3.3 mt of export contracts have been signed.

When the season began in October, the initial realisation for export of raw sugar was Rs 21,000 per tonne against the minimum selling price of Rs 31,000 per tonne in the domestic market. However, exporters are now realising a price of Rs 24,000 per tonne, and can claim a government subsidy of Rs 10,480 per tonne.

This means mills in Maharashtra are realising Rs 31-32 per kg in domestic sales and Rs 34 a kg on average for exports, including the subsidy.

Added to this is the fact that some sources have said that Indonesia has finally decided to allow sugar imports from India, discussions for which had been going on for about two years.

Indonesia is expected to relax quality standards to allow Indian raw sugar. It had kept a minimum limit of 1,200 ICUMSA (International Commission for Uniform Methods of Sugar Analysis) for its imports, but Indian mills don’t produce raw sugar of such quality. Now, sources believe, this level will be relaxed to 500-600 ICUMSA. A formal announcement is expected soon.

ISMA also said in a note issued Tuesday that “there is an estimated deficit of 8-9 mt in 2019-20 sugar season in the global market and that Thailand’s exports are likely to be down by 3-4 mt due to lower production there. Indian sugar exports may get accelerated in the coming months, and could achieve more than 5 mt of MAEQ in the whole season against 6 mt of MAEQ.”

However, Praful Vithlani, chairman of All India Sugar Trade Association, aired concerns over the delay in subsidy payment. This adds to working capital cost, he said, adding that some mills were yet to receive last year’s subsidies.

Apart from this, with low availability, sugar mills in Maharashtra are expected to close operation in a month’s time and mills in Uttar Pradesh may do so by mid-April, Vithlani said. Mills will not produce more raw sugar after that and, hence, “the export window is shorter. So, all industry representatives should decide to take a risk and produce more raw sugar to export it later,” Vithlani added.

As on February 15, mills have produced 16.98 mt of sugar, compared to 21.96 mt the previous year. As many as 23 mills have stopped crushing operations because of non-availability of sugarcane

In Maharashtra, production has dropped to 4.34 mt so far this season, against 8.3 mt last year, with the full year’s production estimated at 6-7 mt. In UP, 6.63 mt of sugar has been produced so far, around 5 per cent more than last year.

Ex-mill prices in the southern and western regions are currently around Rs 3,100-3,200 per quintal and Rs 3,200-3,300 per quintal in the northern region.