Duty-free imports unlikely to bring down sugar prices

Duty-free import of raw sugar till June is unlikely to bring down retail prices in the near-term, says a report.

Recently government allowed duty-free import of raw sugar to the tune of 0.5 million tonne till June 12.

"Duty-free import is unlikely to have any significant negative impact on the prices or profitability of sugar mills in the near-term. While raw sugar imports are unlikely to negatively impact domestic sugar prices, this may dampen prospects of a further price rise," Icra said in a report.

But import beyond June may lead to pressure on stock position and may lead to a price correction in the forthcoming sugar year, it added.
 

With the 0.5 mt of imported sugar, the closing stock for the current season is estimated to be 4.5-5 mt, which would be sufficient to meet the requirement of around two months of domestic consumption. This is still lower than the normative stock level of three months or around 6 mt and also the previous year's closing stock level of 7.7 mt.

Currently, global raw sugar prices are around 16 cents/lb. At the current prices, total conversion cost into refined sugar is likely to be at around Rs 32,000/mt. Thus, the importers are likely to benefit around Rs 4,000-5,000/mt at a domestic price of Rs 36,000-37,000/mt.

The imports will benefit mills in the West and the South, which are currently facing profitability pressures due to low cane availability, the report noted.