Subsidy helps sugar mills export 1.35 mt in a month

Since the government announced an export subsidy of Rs 3,333 a tonne on February 12 for shipments of raw sugar in February and March, mills have contracted for around 1.6 million tonnes (mt).

“Of that, we have shipped around 1.35 mt,” said Abinash Verma, director-general, Indian Sugar Mills Association (Isma). There is potential for another 400,000 tonnes, which would achieve a total of two mt, half the exportable surplus the industry claims to have for the current season.

While mills in Uttar Pradesh have little potential for export, due to high transportation cost, those in north Karnataka and Maharashtra have taken advantage of the subsidy.

Not much is left of the cane crushing season. Mills in Maharashtra will start declaring closure in mid-March. Those in other parts will also start gradually announcing closure, due to non-availability of cane. Industry sources believe all mills will be closed for this season by April 15.

“For the current season, half the surplus quantity is expected to be shipped. Another half will be taken up during the next season. Hence, we expect mills to see a turnaround next season onwards,” said Verma. According to informed sources, Isma is revising its sugar production forecast to 23.7 mt, slightly lower than the estimated consumption of 23.5 mt. Therefore, the industry will have a minute surplus when this season ends.

Meanwhile, both domestic and international prices have started recovering, if marginally. This is due to the export incentives announced by the Indian government and extremely bad weather expected to hit the Brazilian cane crop, resulting in lower supply from the world’s two largest  producers. Fuelled by continued fear over the damage to output prospects in Brazil’s key centre-south region from a dearth of rain, raw sugar futures for delivery in May jumped to 17.51 cents a pound on Monday at the benchmark Intercontinental Exchange, a rise of a little over eight per cent since Delhi announced its export incentive.

Refined sugar at NYSE Liffe in London has gained six per cent, to trade at $472.80 a tonne since February 12. Spot prices in the Vashi (Navi Mumbai) mandi was up two per cent to Rs 2,751-2,852 a quintal on Tuesday from Rs 2,702–2,792 a qtl on February 12.

The price fell by Rs 6-7 a kg this year, below the cost of production. But, with the slight rise, the industry is currently breaking even, with the spot price at Rs 32-33 a kg, also reason for Verma’s “we can expect a turnaround in mills’ fortune next season onwards”.