Sugar output likely to exceed demand, may push exports

FE BUREAU
Posted: Wednesday, Apr 04, 2012
New Delhi: India’s sugar output will likely exceed demand in the next marketing year starting October 1, providing adequate leeway to the government to allow exports of the commodity for a third straight year, an apex industry body said on Tuesday.
“With the current trend of sowing all over the country, it seems certain that sugar production in the 2012-13 season will be higher than the domestic requirement, and the country may continue to remain a net exporter next year too,” the Indian Sugar Mills Association (Isma)said.

India, the world's second-biggest sugar producer and largest consumer, resumed sugar exports in 2010-11 after two successive years of a domestic shortage when the country was forced to import. The country is estimated to produce 25.2 million tonne in 2011-12, according to the food ministry, although Isma has forecast that output will touch 26 million tonne. The consumption is expected to be around 21.5 million to 22 million tonne.

The association is pitching hard for fresh exports on top of the three million tonne approved so far 2011-12 so that opening stocks of sugar for the next year get reduced to 5 million to 5.5 million tonne, compared with 6.8 million tonne in 2011-12. Good production as well as 6.8 million tonne of opening stocks in 2011-12 improved domestic supplies and kept prices subdued, dragging down mills’ sales realisation, Isma said.

“Since the window for exports seems to be available only for next couple of months before Brazilian sugar production hits the international market, the government should allow the fourth tranche of sugar exports of around 1.5 million tonne to ensure that the surplus sugar moves out of the country and mills are able to reduce their inventory and clear off a substantial portion of the cane price arrears which have reached alarming levels,” Isma said.

Although global prices are off their peak, exports are still more lucrative as domestic wholesale prices have remained subdued around 8 months now due to adequate supplies. Wholesale prices of sugar (ready-medium) in Delhi are ruling stable around R3,500 to R3,600 a quintal.

The sugar industry often blames low sales realisation in the domestic market and the lack of a clear export policy for non-payment of arrears to farmers for cane purchases. As of March 31, mills owed farmers around R9,900 crore for cane purchases this season.

Sugar output has already risen 13% to 23.2 million tonne in the first half of the marketing year 2011-12, Isma data released on Tuesday showed, brightening hopes that production may cross the food ministry’s estimate.

Output in top producer Maharashtra went up by around 11% to 8.01 million tonne, while production in Uttar Pradesh gained 13% to 6.63 million tonne since October. Production in Karnataka, rose more than 16% to 3.5 million tonne.