Sugar export from public quota may be allowed

The government may soon allow Indian sugar mills to export from the quota earmarked for public distribution system, a senior sugar industry official said on Tuesday.

Agriculture Minister Sharad Pawar is likely to make an announcement on this major step towards liberalisation of sugar export norms within a week, the official said.

Of the total sugar output, mills are allowed to sell 90 per cent of their production either in the domestic market or export, while the remaining is used to meet the requirements of the public distribution system.

"As retail sugar prices have been moderate at Rs 20 a kg since the past year, the government is contemplating to allow mills to export from the levy quota," a senior official with the Indian Sugar Mills Association said.

In India, the government fixes the quantity of sugar that mills can sell in the open market every month. It also releases a fixed quantum of sugar for fair price shops under the PDS.

"Retail prices at current levels are fair and attractive for both consumers as well as manufacturers, and there is hardly any likelihood of price spiralling in the near future," the official said.

India is likely to harvest a bumper sugarcane crop with an estimated sugar output of 18.5 million tonne in the current October-September sugar season, compared with 13.5 million tonne in 2004-05.

Indian mills need to export two million tonne white sugar in lieu of the equivalent amount of raw sugar imported in the last season in the wake of severe cane shortage due to drought.

Under the advance licence scheme, Indian manufacturers have to export white sugar in quantities equivalent to the raws imported within 24 months.

The Indian government does not allow free exports of the sweetener, as it is an essential commodity.

Meanwhile, sugar companies have been contracting lucrative export deals this year with many countries scouting for the sweetener due to supply crunch overseas.

According to the London-based International Sugar Organisation, global sugar deficit is likely to touch 2.22 million tonne in 2005-06 (October-September).

In November, the body had projected a deficit of 1.01 million tonne. The gap between import and export availability is seen at 2,86,000 tonne.

With higher output and exportable surplus, profit margins for Indian firms are seen at over $100 per tonne.

International sugar prices had risen almost 37 per cent last year to average $279 per tonne. Prices are likely to trade at $300-532 this year.

Sugar shortage in the international markets has been aggravated as Brazil, one of the world's top three sugar producers, is diverting more cane for producing ethanol.

Sugar output in Thailand, one of the largest exporters, has also been low in the current season at 4.62 million tonne, down 10.7 per cent from a year earlier.