Sugar mill owners fear a major crash in prices, with the Indian market getting flooded with Brazilian sugar coupled with an excess stock of 75 lakh tonne from domestic mills. The country is also expecting production of 255 lakh tonne in FY15, which is in excess of demand by around 25 lakh tonne. This will lead to an excess stock of 100 lakh tonne leaving the quantity of imported sugar being dumped in the country.
OP Dhanuka, chairman and MD of Riga Sugar Company and former president of Indian Sugar Mills Association, said since May 2014 sugar prices have fallen to R2,700 per quintal from R3,200 per quintal. Retail sugar price, which was R40 a kg in September, has come down to R34 a kg. There is under-recovery in selling sugar as the average cost of production exceeds sale price. “This situation has come because there is surplus production and stock for four years. But import has continued with lower import duty (25%), affecting the Indian sugar industry,” Dhanuka said.
He said re-export of sugar against advance licence is only 18 lakh tonne against import of 40 lakh tonne, mostly from Brazil. This has left 22 lakh tonne of excess imported sugar in the domestic market. The imported raw sugar for re-export is converted to white sugar by refineries in India but often stock piles up, with re-exports not taking place.
With sugar mill owners unable to realise proper prices for 3-4 years, over 600 sugar factories are in a vulnerable position with 5 crore sugarcane growers affected. Non-payment to farmers for cane by mill owners has been estimated at R7,000 crore at present, which in March 2014 was as high as R13,000 crore.
Dhanuka said ISMA, in a letter to PM Narendra Modi, has asked for fixation of cane price linked with realisation of sugar prices, while import duty has been sought to be raised from 25% to 40%.