Government warns of action against sugar mills over slow exports

Orders to fix quarterly shipment quota and submit progressive report to the Food Ministry or face action

The government has warned mills to speed up sugar exports to achieve the 5 million tonnes annual target fixed for the current season (October 2018 – September 2019).

Despite incentives offered for exports, sugar mills have contracted for a mere 600,000 tonnes of sugar exports and shipped around 179,000 tonnes for the quarter between October and December 2018. Additionally, around 80,000 tonnes of the sweetener is kept at various ports for loading for the quarter ending December 2018. This means, total quantity of export stands at a negligible 260,000 tonnes for the October – December 2018 quarter as against the quarterly average target of 1.25 million tonnes.

The government has advised sugar mills once again to undertake export of sugar as per their allocated quantity of MIIEQ. Failing which it would be treated as violation of government directives and accordingly appropriate action would be initiated against the defaulting sugar mills.

“In case, a sugar mill fails to achieve its quarterly sugar export target the equivalent quantity of un-exported sugar during any specified quarter shall be deducted in three equal installments from the quantity of sugar to be allocated to them of monthly stock holding for each month in the subsequent quarter,” said a circular from the Directorate of Sugar issued on Friday.

The circular further said that it has been observed that the sugar mills are not undertaking export of sugar at a desired pace. “Only about 246,000 tonnes sugar has been exported and contracts of only 600,000 (including 246,000 tonnes of actual export) have been signed so far in the first quarter of the season. The Centre has taken a very serious view regarding non compliance of the direction of the government by most of the sugar mills. For this purpose sugar mills are required to set their quarterly export targets and intimate the same to the Department of Food and Public Distribution (DFPD) fulfillment of the quarterly export target by the sugar mills shall be monitored by DFPD,” it added.

The apex industry body Indian Sugar Mills Association, meanwhile, has recommended the government to make MIEQ quota mandatory with a penal provision instead of indicative currently.

“We have repeatedly recommended the government to impose a penalty on sugar mills who fail to meet allocated quantity of export,” said Abinash Verma, Director General, ISMA.

With subsidy amount, exports of sugar stand viable at the current price with a marginal profit. But, mills do not supply adequate quantity for exports fearing delay in subsidy amount which may dwindle their working capital.

The benchmark Nybot Sugar contract for delivery in March is quoted at cents 12.65 a pound with domestic price hovering between Rs 29 – 30 a kg.

The allocated quantity of 5 million tones would improve liquidity of Rs 100 billion for sugar mills at the current price without subsidy which may partly ease working capital issue.

“The objective of the government is to reduce inventory which is piling up with nearly 10 million tones of carryover stocks and anticipated 31.5 million tonnes of output for the current year as against estimated consumption of 25.5 million tonnes,” said an industry expert.