The war between sugar producers and refiners on the issue of whether the government should lower a 40% import duty on the sweetener is now out in the open.
The war between sugar producers and refiners on the issue of whether the government should lower a 40% import duty on the sweetener is now out in the open. In a scathing attack on a segment of the industry, Indian Sugar Mills Association (Isma) president T Sarita Reddy on Friday accused speculators and refiners of spreading rumours of an acute shortage of sugar in the current marketing year through September “to suit their personal vested interests, and create opportunities for themselves to import sugar”.
Reddy’s statement follows apprehensions expressed by refiners and traders of an impending crisis in sugar supplies after prices rose in recent months. Reddy questioned the very basis of their assumption of a massive shortage in 2016-17.
“Their (refiners and speculators) statements on the shortage of sugar, mostly made without any analysis and research, are causing speculation and volatility in the sugar market and spiking sugar prices unnecessarily,” Reddy said. She added that on the contrary, Isma’s sugar forecasts are mainly based on satellite images of cane areas, feedbacks from members and other stakeholders from across the country.
“Unlike the sugar millers, who have a direct responsibility towards small and marginal farmers, and have a close relationship with them for decades, the speculators and refiners have no responsibility towards our farmers, domestic sugar manufacturers or even the domestic consumers. Therefore, they have a short-term gain in mind,” Reddy added.
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Narendra Murkumbi, the managing director of the country’s largest refiner, Shree Renuka Sugars, wasn’t immediately available for a comment.
Reuters, however, quoted Murkumbi as saying on Wednesday that India’s sugar production will likely be 20 million tonnes in 2016-17, mainly due to lower output in key producing states such as Maharashtra, Karnataka and Tamil Nadu. Traders have also projected output at around 20 million tonnes.
The government this week kept its forecast of sugar production at 22.5 million tonnes and Isma predicted (on Wednesday) 21.3 million tonnes for 2016-17. Apart from the import duty, the government has slapped a 20% export duty on sugar to keep domestic supplies steady.
Without naming any company, Reddy also alleged that some people, with vested interests, are trying to confuse the market by simply throwing various numbers for sugar production and consumption in 2016-17.
“Their ulterior motive is to create panic to either artificially push up global prices because they are holding a position in the futures market or want to somehow force sugar imports into India,” she said.
While revising down the country’s sugar production data by 9% from the previous estimate to 21.3 million tonnes for 2016-17, Isma said on Wednesday that domestic sugar supplies would still remain above the consumption level.
This is because the country had carry-forward stocks of 7.75 million tonnes from 2015-16. Based on actual sugar sales in October-December 2016, the trend in January 2017, and reports of lower off-take by beverage manufacturers, sweet makers etc, the sugar consumption estimate for the year was revised downwards to 24.2 million tonnes (from roughly 24.85 million tonnes last year), Reddy said.
Assuming that the last eight months of the current season through September could witness sugar sales akin to the last year’s trend, the sugar despatches in 2016-17 would be around 24.2 million tonnes. This means that closing stock of sugar in 2016-17 would be 4.85 million tonnes, which is equivalent of two-and-a-half month’s consumption, according to Isma.
Sugar prices have started rising last year in response to an anticipated fall in supplies in 2016-17 and have touched a seven-year high earlier this year, after years of lower prices. In fact, in 2014-15, sugar prices touched a six-year low, dropping below even the cane cost. The average all-India monthly ex-mill sugar price has gone up close to 4% between October and January, according to Isma data.