MNC offers to buy 6 lakh tonne sugar

New Delhi, Dec 3: In what is being termed as a “make or break deal” for the sugar sector, a transnational trading house is offering to buy up to six lakh tonne sugar annually at London prices ‘free on board’ (FoB).

“An MNC has offered to buy sugar from cooperative mills at Liffe (London International Financial and Futures Exchange) prices, but wants it to be a long-term contract under which, at least, 50,000 tonne sugar will have to be sold every month,” National Federation of Cooperative Sugar Factories sources told PTI.

The proposed deal will ensure that the MNC will not have to source sugar from Brazil for selling to customers in Sri Lanka, Bangladesh and Indonesia where India has a freight advantage of $12-17 per tonne.
They, however, said cooperatives are wary of the proposal, fearing they will run losses if the Liffe prices go down from its present position at $240 per tonne, as the contract offered is for not less than a year.

Indian Sugar Mills Association director-general SL Jain said he was all for the offer, if it has been made at London prices.

He said European sugar exports are going to be lesser this year by about 2.5 million tonne and Liffe, which is the indicator of the European scenario, will remain strong.

However, in the cooperative mills none is prepared to take the risk, saying “even otherwise around one lakh tonne is being exported every month”.

Mr Jain said at a time when Liffe is likely to move up, one should blindly go for such a deal as it would keep Indian sugar exports in a good stead.

It is the freight advantage that India has over other sugar exporters which has prompted transnational dealers to make such a deal. While Brazil will be exporting nine million tonne sugar this year compared to 6.5 lakh tonne last year, Thai exports would also be higher by around four lakh tonne.

Brazil is offering its sugar at excessive discounts over Liffe and aggressively going for exports and later this month Thailand will also hit the global market.

Due to a $70 gap between the international prices of raw and white sugar, there was no chance of India going for raw sugar exports in the foreseeable future, Mr Jain said.

In these circumstances if a deal is being offered at the London prices, analysts feel India should go for it.

This could particularly improve the export position of Maharashtra cooperatives, which despite being the leading producers of sugar in the country have hardly had a 10 per cent share in the total exports.

— PTI