Mills can buy sugar from 3rd parties to meet export obligation

Sugar mills that do not have enough of the sweetener to meet export obligations can now source the commodity from a third party to undertake shipments and take advantage of high prices in the global market.

Mills had imported 20.75 lakh tonnes of sugar in the 2004-05 sugar year (October-September) under the Advance Licence Scheme (ALS), which makes it mandatory for mills to export an equal quantity later. The mills are left with an obligation of about 8,00,000 tonnes, which they have to fulfil by March, 2011.

Last month, the Food Ministry had allowed sugar exports under the ALS in two tranches -- 25 per cent by November and the remaining 75 per cent by March next year.

According to sources, some of the sugar mills did not approach the ministry to get the export release order, which is mandatory to make shipments, as they did not have sugar in their stocks because of the lean season from April to September.

Out of the 1,98,000 tonnes to be exported in the first tranche, the millers have so far taken release orders for 1,40,000 tonnes of sugar, they added.

The ministry has allowed the mills that have export obligations to source the sweetener from third parties so that they can get the benefit of prevailing high global prices, sources said.

A senior Food Ministry official hoped this decision would not only enable mills to fulfil their export obligation, but would also help them fetch good returns.

From next month, the ministry would start issuing release orders for the second tranche so that the export obligations get completed by March, 2011.

The government has allowed sugar exports under ALS as the country is likely to achieve a higher production than the annual demand in 2010-11 (October-September) after two years of low output.

India's sugar production is estimated at 25 million tonnes in 2010-11, while demand is pegged at 23 million tonnes.