Sugar sector hits panic button as global prices fall

Demands creation of buffer stock, export incentives

With sugar prices falling in global markets, private and cooperative sugar factories said it will hit the Indian sugar sector. On the Intercontinental Exchange on Thursday, raw sugar prices dipped below 15 cents for one pound (0.45 kg), the weakest level since June 2010.

“The import of raw sugar is not viable with the increase of import duty to 25 per cent and due to current domestic and global conditions, as well as the rupee-dollar exchange rate. Further, there is a surplus of 2.5 million tonnes, which is putting pressure on domestic prices as cash flows are blocked. There is a need to export this, but it is unviable,” Abinash Verma, director-general of Indian Sugar Mills Association (Isma), told Business Standard.

Verma said the Centre had provided incentive to export four million tonnes and approved it. “But 0.7 million tonnes have been exported;  3.3 million tonnes are yet to be exported. As the global prices are below Rs 3,300 per tonne, exports are not attractive.”  

Isma will make a representation to the Centre and seek its help so the sector could export, Verma added.

“The government will be requested to create buffer stock to reduce the payment of the carrying cost to the sector. The government will also have to provide some incentive to convert surplus cane juice to ethanol,” he added.

The Federation of Cooperative Sugar Factories in Maharashtra, a representative body of 200 units, made a case for increasing the import duty to 40 from 25 per cent.

“It is difficult to absorb the international market rates. Factories will not be in a position to pay the fair and remunerative price to growers. The federation will soon seek the Centre's help to avoid another crisis,” said Sanjay Babar, managing director.

He said the Centre should continue the policy of export of four million tonnes by September 2015, to help the sector produce raw sugar and export it. This will help control the surplus.

The National Federation of Cooperative Sugar Factories, too, pressed for raising the duty to 40 per cent and allowing conversion of juice to ethanol.

Yogesh Pande, founder president of Maharashtra Sugar Brokers Association, also sought the government's intervention to restore sugar prices resuming the release mechanism, which would control the quantity of sugar made available in open market.