Sugar firms in the lurch over export ban

Sugar prices in India may temporarily drop slightly following the government's decision to stop issuing fresh sugar export licences till March 31, Kolkata-based companies said.

The industry, however, awaits clarification on whether the ban applies to even those deals for which letters of credit have been issued.

"Prices might temporarily come down by Rs 1,000-1,500 a tonne, but will again go up as at present there is no excess sugar in the country," OP Dhanuka, chairman and managing director of Riga Sugar Company Ltd said.

He said it is not yet clear whether the ban will apply even to those deals against which letters of credit have already been issued.

Upper Ganges Sugar Mills' R N Bagaria said the government's decision will help keep prices under check.

"I think the move will only help check further rise in prices as supply is unlikely to improve dramatically until the new crushing season," he said.

Balarampur Chini Mills' Director Kishore Shah said the company is yet to fully understand the impact of the government decision.

"It is not yet clear whether the ban would be applicable also for export of sugar against import obligation," Shah said.

Dhanuka said the industry is aware about a note issued by cabinet secretary to food secretary on Monday stating that no further extension and licenses be given (for sugar export) till further notice.

He also said the food secretary had sought clarification on whether the ban will affect deals already concluded against raw sugar imports.

Meanwhile, a notification by the Directorate General of Foreign Trade on Wednesday said sugar exports will not be allowed until the end of March 2007.

India's sugar production in 2005-06 (October-September) was estimated at 19 million tonnes and in 2006-07 at around 22 million tonnes.

Under the advance licence scheme, Indian sugar mills need to export about 2 million tonnes of white sugar in lieu of raw sugar imported earlier.

In 2004-05, mills imported 2 million tonnes of raw sugar and have to export an equivalent quantity by September 2007.

However, most mills have already been exporting sugar and reaping profits as international prices are higher than domestic rates.

Indian Sugar Exim Corp, on behalf of Indian sugar firms, had contracted export deals for 200,000 tonnes to Pakistan of which 80,000 tonnes have been shipped.

The remaining amount will be shipped in the coming days.

July sugar M-Grade (Muzaffarnagar) slipped to a low of Rs 1,852 on the National Commodity and Derivatives Exchange after touching a high of Rs 1,901 earlier during the day.