Sugar body says India to be net exporter

India's sugar sector is likely to register a turnaround in next 2-3 years, enabling it to bounce back as a net exporter of the commodity, Peter Baron, executive director, International Sugar Organisation, said on Friday.

He said raw sugar imports would gradually taper off if India experiences good monsoons and there is ample cane for crushing.

India's sugar output, which touched an all time high of 20.1 million tonne in 2002-03 (October-September) season declined to 14 million tonne last year and is pegged at 13 million tonne in the current season.

In 2001-02 and 2002-03, India was a significant sugar exporter, selling 0.4-1.3 million tonne of whites annually. In 2003, it began import of raw sugar, which is expected to touch an all-time high of 2.0 million tonne in the current season.

"If past trends are any indication, I once again see India as a potential exporter. In 2-3 years its sugar output will be back to normal and even after accounting for an increase in population it will be able to export," Baron said.

The London-based ISO is the global apex body governing matters related to sugar.

As sugar cane output increases, mills will by and large be disinterested in importing raw sugar and instead use domestic cane to manufacture white sugar, he said.

Importing duty-free raw sugar for re-export after refining may enable some factories to spread their fixed costs but it cannot become a trend in general, he added.

Baron's comments assume significance as India has experienced two successive years of decline in sugar output and is currently drawing on its carried-forward stocks to meet domestic demand.

Moreover, domestic industry looks at raw sugar imports as a powerful instrument to extend their manufacturing operations by a few months, increase capacity utilisation and make India a 'toller' of sugar.

A tolling country imports raws, refines them and sells whites in the world market. If there are good monsoon rains and domestic cane and sugar output move higher, it will probably not be necessary for India to toll sugar, Baron said.

There will be a slow process of cane utilisation moving gradually from gur (jaggery) and khandsari units to sugar manufacturing factories. Khandsari is a crude sweetener prepared from sugarcane in small village-based units.

"I think making sugar instead of gur or khandsari from cane is a more efficient way of producing sweeteners and therein lies the way ahead for India instead of importing raws for refining," he said.

In any case the current Indian trend of imports-for-re-exports is only due to government incentives, which may not be available in the event of a policy change in future, he added. "It is just a policy, it might change," he said.

The continent is expected to remain the largest consumer of sugar in the coming years and will import more due to widening of gap between demand and supply in many countries, Baron said.

Population and consumption would grow faster than production in Asia and this will be a positive factor for the exporting nations, he said.

However, this is unlikely to result in a spurt in prices since countries like Brazil will step up output to meet the increasing demand.

"I feel the trade is quite balanced. In the current season global supply deficit is put at 1.6 million tonne but in a world market of over 140 million tonne it is small shortfall, which will not influence prices much," he said.

There is no tightening of supplies as countries like India and China have drawn heavily on their carried forward stocks.

So, the current deficit in output only helps in bringing down the stocks marginally even as the prices remain reasonable.

Thursday, the benchmark New York raw sugar May futures were trading at nearly eight-month low of 8.15 cents per pound.