Sugar export sanction not that sweet

The government's delayed approval to export of 500,000 tonnes of sugar under open general licence (OGL) is not being cheered by the industry. Analysts say realisation from exports would be around Rs 2-3 per kilogram less than what it would have been if export was allowed immediately after last December’s policy announcment.

After food inflation entered double digits in December, it was decided, in the first week of January, that the matter of sugar exports be referred to an empowered group of ministers (EGoM). The EGoM met on March 22, after more than two months, and cleared the proposal. A formal order in this regard is expected in a few days.

Industry players say inordinate delay has not only lowered their export realisation, but could also put a spanner on lucrative export deals with the European Union. “The EU recently placed an order for import of 300,000 tonnes of high-value sugar at an attractive price of Rs 40 per kg (ex-factory). But this won’t materialise if millers fail to enter into contracts in the next 15 days,” a senior industry official said.

He said Indian millers can capture, at least, 200,000 tonnes of the order. He said the procedural delay on part of the government in giving a final nod to the exports is not helping matters.

Sugar mills in Maharashtra can export at Rs 30 per kg (ex-factory), while domestic prices are hovering in the range of Rs 25.50 to Rs 26 per kg in the state.

“In other words, millers in Maharashtra, as on date, stand to gain Rs 4.50 to Rs 5 per kg on exports. But the same realisation could have been almost Rs 2-3 per kg more, if the 500,000 tonnes could have been exported in January,” the official said.

In Uttar Pradesh, the ex-factory realisation from exports is estimated to be around Rs 28 per kg after factoring in transportation cost from mills to ports, while the domestic price of sugar is also around the same level of Rs 27.50 to Rs 28 per kg.

“Export contracts to EU countries have to be finalised within the next 15 days since countries such as Dubai are vying for the opportunity,” the official said.

Brazil, which is the world’s largest producer of the sweetener, is also expected to start exporting sugar from mid-May. “As of now, Brazilian exports don’t pose a threat to India. But if final clearances are delayed further, then we should brace for the same,” the official said.

In Brazil, sugarcane crushing begins usually from May and exports begin from middle or late May. Sugarcane production in Brazil is expected to be around 640 million tonnes in 2011-2012 crop marketing season, that has started in April, almost 20 million tonnes more than last year.

India's sugar production is estimated at 24.5 million tonnes in 2011-12 sugar year (October-September) against 18.8 million tonnes in the previous year. The annual demand is pegged at 22 million tonnes.