Bitter sugar harvest in store

The sugar industry is all set to face a glut in contrast to the wheat shortage scenario. The total domestic production of sugar is projected at about 230 lakh tonne in 2006-07, up by 40 lakh tonne over the last year.

The carry-over stock is estimated at about 25 lakh tonne as on November 1. The annual consumption is estimated at about 185 lakh tonne. The statistics point to a situation where the country could face a glut in sugar.

On July 4, the government, with a view to control the rising prices of essential commodities, had banned the export of sugar till March 3. On July 16, Union Food and Agriculture Minister Sharad Pawar had said the government was planning to lift the ban on sugar exports from the beginning of the next cane-crushing season in October this year.

However, it is understood that the differences between the finance ministry and the food ministry over the availability of sugar have stalled the lifting of ban. More than two weeks have passed since the domestic festivals ended, but there is no clear picture with regard to the lifting of ban.

"Industry was on the right track last season and even the farmers had been able to get cane payments in time. The international prices of sugar have fallen, making export less lucrative," said Managing Director of National Federation of Cooperative Sugar Factories Vinay Kumar.

"At least 2 million tonne of sugar should go out of the country so that the domestic prices remain at a reasonable level. If sugar is not exported, the profitability of sugar companies, particularly those which have not diversified into ethanol and cogeneration, would be affected," said Sanjay Tapriya, director, Finance, Simbhaoli Sugars.

Companies, such as Simbhaoli Sugars, Renuka Sugar, Dhampur Sugar and Thiru Arooran, among others had imported about 26 lakh tonne of raw sugar between 2002-03 and 2004-05 seasons (October-September) under the Advance Licence scheme.

Of the total amount, about 10 lakh tonne have been exported so far. The London futures prices of sugar for October delivery were ruling in the range of $485-490 tonne when the export was banned. However, currently, sugar futures for December delivery are ruling at a low of about $395 per tonne.

The finance ministry is concerned that the lifting of ban may lead to a price rise and cause a higher inflation. Sugar has a weightage of 3.62 per cent in the wholesale price index (WPI), even higher than steel (3.2 per cent) and cement (1.73 per cent).