Sugar companies away from coastal regions are firm on their objection to any removal of quotas in the permission to export an additional million tonnes of the sweetener.
The government has announced permission to export this much of sugar under Open General Licence (OGL). The expectation is that it would do so on a ‘first come, first serve’ basis. In the two previous rounds of export, there were allocations shared between all mills, with smaller ones getting a smaller share. Since the minimum container load for export is around 25,000 tonnes, smaller mills sold their allocation quotas at a Rs 2,000–3,000 per tonne premium to larger ones.
Says G R Morarka, chairman and managing director of Dwarikesh Sugar Industries, “The new system will benefit only a few mills based near ports. Apart from them, hardly half a dozen traders benefit.” Dwarikesh was allocated 8,172 tonnes in the last allocation, worth Rs 2 crore. It sold the quote through a third party. Since each mill got some benefit, it helped their finances.
The government has allowed two million tonnes of sugar export during the current season, in addition to around half a mt carryover quota from the previous season. Out of that, hardly 1.2 mt has been shipped. This means, around 0.6 mt from the current season’s allocation of two mt was exported. The remaining 1.4 mt is still to be shipped.
“The release order for the first 1 mt was allowed until February 16. Since, the execution date is valid until April 16, exporters are executing orders gradually. For the second tranche of 1 mt, however, the release order date stands till April 17.,” said Abinash Verma, secretary general, Indian Sugar Mills Association.
Industry sources say that the government would soon announce a ‘first come, first serve’ mode for allocation of sugar quantities under the third tranche of a million tonnes export.
Defending the government’s move, Narendra Murkumbi, managing director of Shree Renuka Sugars, said, “It is a matter of a few lakhs of rupees for smaller players. Anyway, sugar export would lower stocks, resulting in higher price realisation from the domestic market.”
Large quantity allocations to bigger sugar mills would not only help executing orders faster but also help the industry benefit from sugar price movement in global markets. Today, aggregators lose opportunity to cash in on higher price in the international market by the time they sign contracts with global buyers. Rapid price volatility, sometimes, is higher than the realisation smaller mills get by selling registration certificates to aggregators, said Murkumbi.
Sugar production in India for the year is estimated at 26 mt. By, March 31, output was estimated at 23.2 mit, about 13 per cent higher than the 20.45 mt produced by the same time last year.
Currently, realisation from the export market is Rs 28,000-29,000 per tonne as against an ex-factory price of Rs 27,000-27,500 per tonne across the country. For exports, coastal mills get around two per cent of rail freight advantage versus their hinterland counterparts in states like Punjab and Uttar Pradesh.
