Raw sugar exports likely to be hit on ‘late’ incentives by govt

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Pune | Published: May 14, 2015 12:11:03 AM

Both the Centre and Maharashtra govt have announced incentives for raw sugar exports. These announcements, however, have failed to bring any cheer to markets with mills claiming that sops have come late

Raw sugar exports from the country may not exceed 3-5 lakh tonne this season, top officials  of the Indian Sugar Mills Association ( Isma) said.

Both the Centre and the Maharashtra government have announced incentives for raw sugar exports. These announcements, however, have failed to bring any cheer to markets with millers claiming that these incentives have come late.

Abhinash Verma, director general, Isma, estimates that raw sugar exports until March 31, 2015, were nearly 3 lakh tonne. Of which around 1.5 lakh tonne has already been shipped out of the country. The total raw sugar exports this season could touch 3-5 lakh tonne, he said. The production is nearly over and the season is almost ending, he said, adding that the announcement has come in slightly late.

In February, the central government decided to give mills a subsidy of  Rs4,000 a tonne for exports of up to 14 lakh tonne of raw sugar, an incentive some traders said may be too little as global prices remain weak with large supplies from top producer Brazil set to flood the market soon. The subsidy given by the state is expected to be applicable for exports of 800,000 tonne raw sugar. Sugar mills in the country traditionally produce whites for local consumption.

Mukesh Kuvedia, secretary general , Bombay Sugar Merchants Association, says that although the government of Maharashtra and the Centre have announced subsidies, he did not expect much export to take place. This is because the international prices are low and our cost of production is higher, he pointed out.

Ex-mill prices of sugar have fallen to Rs 21-24 per kg in the country, while the cost of production is over Rs 30 per kg. Sugar production in India is estimated to be higher than domestic consumption for the fifth year in a row this season.

Moreover, the season is almost ending and very few mills are in a position to take up the production of raw sugar, which is usually factored in at the start of the season, Kuvedia said. Had the government given the incentives at the start of the season, the picture would have been different, he said.

Now the mills will have to wait for the next season which begins in October and then plan for raw sugar exports since this subsidy is allowed for the 2015-16 season, he said.

Experts are estimating Brazil to have bumper sugar production next year as well and as a result of which there could be a glut in the international markets.

According to Sanjeev Babar, MD, Maharashtra State Cooperative Sugar Factories Federation (MSCSFF), the federation is still in the process of gathering information but around 5-6 factories have entered into forward contracts for around 1.5-2 lakh tonne of raw sugar.

Figures from private players are also still being gathered and therefore accurate estimates are still not available, he said, adding that the exports may not exceed 4-5 lakh tonne this year because the incentives have come in late.

This is the reason that millers have been demanding an extension on raw sugar subsidy to continue for at least 5 years so that millers are in a better position to plan out their inventory. This season, the incentives have come in late from both the Centre and the state and therefore the mills may not be in a position to avail benefits, he said. Last year, Maharashtra exported around 7.5 lakh tons of raw sugar and millers also received Rs 138 crore worth incentives for the previous seasons on March 31, 2015, he added.

This year, factories  across the country have been struggling with cane payments. Cane payment dues have mounted to R20,000 crore.

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