Sugar traders averse to Pak, Bangla exports

Sugar traders are not very keen to export sugar to Bangladesh and Pakistan during September owing to higher domestic prices vis-a-vis international prices and lack of government clearance.

"As per the release mechanism, we are awaiting a government notification on the matter. Our request is still pending and without this, exports will not be possible," said a top mill owner. This is apart from the re-export obligation which millers can exercise.

The re-export obligation is to import raw sugar with a commitment to re-export same quantity of white sugar within 24 months.

The sugar sector is under government control with marketing restrictions such as levy and free-sale quota. Under the current marketing restrictions, the mills are required to deliver 10 per cent of their production to the government as "levy" under the public distribution system.

The remaining 90 per cent is "free sale" sugar which regulates the quantum of sugar that mills are allowed to sell in the open market in a particular month.Exports, sans those under the re-export obligation, come under the free-sale quota governed by the Sugar Control Order, 1966. This order is in effect a restriction on how much sugar any individual mill can sell, preventing producers from selling or agreeing to delivery any sugar or remove stocks from a bonded factory warehouse unless directly authorised to do so by the central government.

Industry insiders say the government wants to discourage exports in the remaining period, which is less than two months, of the current sugar year as closing stocks are low.

India's sugar output this year is around 135 lakh tonne with a closing stock at 45 lakh tonne, which is lower than previous year's 85 lakh tonne, as per estimates released by the Indian Sugar Mills Association.

"Overall, the delay (in issuing the order) seems to be a bid to discourage prices from rising further in the domestic market," said an expert.

NCDEX M-grade sugar October contract traded at Rs 1,870 per quintal, that is $415 per tonne. London International Financial Futures Exchange white sugar contract ended at $283 per tonne, on Thursday.

Another mill owner lamented that by the time government will issue the notification, India will have lost the current export opportunities.

However, export possibility to Pakistan or Bangladesh (the latter has recently opened road route for sugar exports) was presumably slim. "Higher domestic prices make exports to Pakistan unfeasible," said a Uttar Pradesh sugar trader.

With prices likely to see a rise over the next three to four months internationally, it is unlikely that mill owners will exercise their re-export obligation now. "We better wait for a few months as have almost 18 months to exercise that obligation," said Siddharath Shriram, chairman of Mawana Sugars.

Though India's sugar output this year is around 135 lakh tonne, it is likely to rebound to a comfortable 180 lakh tonne next year, thereby, allowing the country to export.