Government scraps sugar export tax, trade sees marginal long-term impact

Traders said abolition would help push out just 100,000-150,000 tonnes mostly to Bangladesh and Nepal as everywhere else global prices are weak

The government has abolished the 20 per cent export duty on sugar to boost overseas sales, but traders and some industry players said it isn't enough to absorb the domestic surplus and could just have a momentary impact on prices.

The duty was abolished amid a strong upsurge in sugar production for 2017-18 season that started in October from 26 million tonnes to over 29 million tonnes.

With consumption expected at around 25 million tonnes, the country is projected to have a surplus of around 4-5 million tonnes.

However, traders said abolition of sugar export tax would help push out just 100,000-150,000 tonnes of sugar mostly to neighbouring Bangladesh and Nepal as everywhere else global prices are weak.

Raw sugar futures have slipped almost 18 per cent in the New York market this year owning to global surplus.

Domestically, ex-mill prices in most places have dropped to around Rs 2,900-3,000 per quintal, while the total cost of production is somewhere around Rs 3,000-3,500 per quintal.

This means that for every quintal of sugarcane crushed, the mills are losing around Rs 400-500.

This mismatch has once again lowered the capacity of mills to pay to farmers on time, something which has led to arrears mounting to more than Rs 140 billion as on December 31, 2017.

Before, the Narendra Modi government took charge the cumulative sugarcane arrears nationally stood at around Rs 21,000 crore and the current cane arrears are also threatening to reach those levels.

Mills are demanding some kind of export subsidy to ensure that greater quantities of the sweetener could be export both in 2017-18 and 2018-19.

Also, strictly implementing the mandatory ethanol blending programme at the start of 2018-19 might also help.

"Sugar mills are incurring losses as compared to their cost of production of around Rs 3,500-3,600 per quintal. They are unable to pay cane price to the farmers on time," Indian Sugar Mills Association (ISMA) said in a statement released sometime back.

It said India needs to export atleast 2 million tonnes of sugar in 2017-18 and another 4-5 million tonnes in 2018-19.

"Today's move to abolish the import duty would only have a sentimental impact on market and prices," a leading trader said.