Sugar export prospects hit as global prices fall

London daily price slumps 22% to $383.

Even as domestic sugar companies have been urging the government to lift the ban on export of sugar, prices overseas have crashed to levels below domestic prices, doing away with the most compelling reason to export.

The London daily price of sugar for October delivery crashed by about 22 per cent from the recent peak of $489 (Rs 22,700) a tonne on July 6 this year "" two days after India banned sugar export "" to $383 (Rs 17,500) a tonne on Thursday.

Prevailing sugar prices in the country are about Rs 17,000-17,500 a tonne. Factoring in the Rs 1,000 a tonne of fobbing charge incurred on exports, sugar sold in the domestic market would earn Rs 500-1,000 a tonne more than the return on exports.

However, companies with export obligation are still interested in export and want the ban to be removed. The industry is concerned that domestic sugar prices would crash if the export ban is not lifted in October, when the crushing season starts.

If sugar is not exported, lower domestic prices may delay cane payment to farmers. In other words, companies may end up realising lower profits in the 2006-07 season.

"We are expecting a surplus sugar inventory in the coming season. Sugar production is estimated at 220 lakh tonne. Even if export realisation is unattractive, the industry should export so that long-term interests are served", said C S Nopany, the president of Indian Sugar Mills Association.

"We would still like to export as we have enough sugar. The world market is volatile and prices can go up any day," said Narendra Murkumbi, managing director of Renuka Sugar Mills.

"The advantage to the country in terms of foreign exchange and to companies, in terms of revenue, is lost owing to the ban. But the export obligation must be carried out", said Sanjay Tapriya, director (finance), Simbhaoli Sugar Mills.