For those inested in sugar

Sugar exports: Industry faces double whammy
M.R. Subramani
Coutesy: The Hindu

Rupee's rise against $; sharp fall in global prices

Turning bitter
Global prices for white have declined to below $300 a tonne.
The rupee has gained to below 41 to the dollar.

Chennai April 25 Despite the Centre announcing a subsidy for sugar exports, the industry faces a double whammy. Even sugar mills in Maharashtra, which enjoy another subsidy for exports, are seen facing problems.


"Two unfortunate things have happened this month. Sugar prices on LIFFE have declined by over 10 per cent from $333 a tonne around April 10. The rupee has gained sharply from 43 to the dollar to around 41," said Mr Praful Vithlani, a Mumbai-based sugar merchant.

On Wednesday, white sugar on LIFFE declined to $298.60 a tonne in early trade.

The rupee, on the other hand, strengthened to 40.90 against the dollar, a nine-year high.

"These two developments have washed away whatever benefits the subsidy could have given to the sector," he said.


The Central subsidy for sugar exports is Rs 1,350 a tonne for mills near coastal areas and Rs 1,450 for those in interior areas. Maharashtra has announced a subsidy of Rs 1,000 a tonne for exports. The Centre's subsidy has come into effect from April 19, when the gazette was notified. The subsidy does not apply to shipments under the advance licence scheme. Under the scheme, raw sugar is imported for exporting refined sugar.

A notification with regard to the Maharashtra Government's announcement is awaited.

Besides this, the industry is faced with a glut that further worsens the situation.


Trade sources said Maharashtra was expected to produce 85 lakh tonnes of sugar and as a result, the country's production was expected to be 270 lakh tonnes. Initial estimates by the Centre put the production at 230 lakh tonnes and in January, the trade put the figure at 250 lakh tonnes.

The Centre itself has raised its estimates of sugarcane production twice. From an initial estimate of 283.40 million tonnes (mt) to 315.53 mt in February, it has now put sugarcane output at 322.94 mt.


Given the excess supply in the global market, traders see tough times for the industry, especially on the exports front.

"Sellers are in panic. They want to dispose of the sugar stocks. On the other hand, customers are not making any commitments in view of the glut situation and are more intent on a hand-to-mouth existence," the sources said.


According to Mr Prakash Naiknavare, Managing Director, Maharashtra Cooperative Sugar Mills Federation, exports are likely to be restricted to select markets.

"Exports are likely to be in small consignments to countries in Africa such as Somalia," he said.

"The industry hopes to export 15 lakh tonnes at end of the current sugar season in September. But it is going to be difficult to achieve even that," said Mr Vithlani.

This is despite the industry look at Pakistan to export three lakh tonnes sometime after June. Though the neighbouring country is expected to produce 36 lakh tonnes sugar, it is seen lower than its demand of 39 lakh tonnes.

Till now, the Centre has given permission to export 9.5 lakh tonnes and of this, nearly five lakh tonnes have been shipped out of the country since January, when the ban on sugar exports was lifted. The ban was clamped in July last to rein in rising inflation and sugar prices. Since then, the fortunes of the industry have been on a decline.


According to trade sources, if the production were to be 270 lakh tonnes, the carryover stock could be around 100 lakh tonnes next season. "The carryover stock from last season to the current one is 45 lakh tonnes. Adding 270 lakh tonnes production, the total availability will be 315 lakh tonnes. Even if we were to project 15 lakh tonnes exports and 200 lakh tonnes consumption, we will be surely left with 100 lakh tonnes carryover for the next season," trade sources said.