India’s sugar exports hit by falling prices; govt offers transport subsidy



India’s exports have come to a standstill after a sharp fall in prices in the last two weeks.


Raw prices in the benchmark Chicago Mercantile Exchange (CME) for near-month delivery declined by 4 per cent on Monday, trading at cents 12.80 /lb. The decline translates into Rs 1,000 a tonne of fall in Indian denominations which makes a big difference in exporters’ realisation. Following reports of exports becoming unviable, refined (M30) has declined by 2.5 per cent to trade on Monday at Rs 33,100 a tonne in Vashi wholesale market in Maharashtra.



The government is offering a transport subsidy of Rs 1,000 per tonne to mills located within 100 km from ports, Rs 2,500 per tonne for mills located beyond 100 km from the port in coastal states, and Rs 3,000 tonnes per tonne for those located in non-coastal states.


The decline in the sweetener price has wiped out profit margins for Exporters are waiting for a recovery in global sugar prices to re-start export negotiations with overseas importers. Indian exporters have already signed contracts for 800,000 tonnes of so far this season out of 5 million tonnes of Minimum Indicative Export Quota (MIEQ) allotted for the current season.


“After 850,000 tonnes of sugar export contract signed till the third week of October, no new contracts are signed thereafter due to price fall. Exporters are waiting for a recovery in global sugar prices to re-start negotiations with overseas importers. Sugar price below cents 13.25 / lb is not viable at all even with subsidy,” said one of India’s largest exporters on condition of anonymity citing sensitivity.


sugar


Last month, an Indian delegation visited Bangladesh which consumes 2.5-3 million tonnes of sugar every year. India is also evaluating sugar export options in Taiwan, Indonesia and China.


“Sugar export quota of 5 million tonnes is for the entire year i.e. October 2018 – September 2019. The 850,000 tonnes of export contracts signed in the first month of the period itself is a record. The government and the industry are trying hard to export sugar as much as possible. To meet this objective, the government has dispatched teams to meet importers in the potential markets,” said Prakash Naiknavare, Managing Director of National Federation of Cooperative Sugar Factories Ltd.


India has so far contracted for exports of 650,000 tonnes of raw and 200,000 tonnes white sugar primarily to the Middle East and Sri Lanka. Indian exporters are looking to flush out extra sugar to the world market which has gone into ‘balance’ from a ‘surplus’ about a month ago. Considering 31.5-32 million tonnes of output for the current year and around 10.5 million tonnes of carryover stocks from the previous year, total sugar supply in India works out to between 42-42.5 million tonnes against the country’s annual consumption of 25 million tonnes.


Meanwhile, sugar mills in Maharashtra are working out strategy to achieve its full MIEQ export quota of 1.55 million tonnes and also additional quantity if possible by trading sugar with Uttar Pradesh.


“We will achieve full MIEQ export quantity. We are also gearing up for additional quantity of exports for which mills in Uttar Pradesh would require to pass on production incentives and other benefits from the Centre or the state government with buyers in Maharashtra. Incentives given to sugar mills are meant to meet farmers’ cane payment and not for margins of sugar mills. We are taking up this issue with the government. If some mills achieve their own target, benefits on tradable quantity should be given to them to export additional quantity,” said Sanjay Khatal, Managing Director, Maharashtra State cooperative Sugar Factories Federation Ltd.


Meanwhile, around 22 co-operative sugar mills across the country have already called for tenders from potential sugar exporters to execute their allotted quota.

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