Govt to allow 5 lakh tonnes of sugar export

NEW DELHI: The sugar industry can finally heave a sigh of relief on exports with food and agriculture minister Sharad Pawar announcing today that the Centre will allow export of half million tonnes of sugar this fiscal against a backdrop of high global sugar prices.

A Rs 90/qtl hike in levy sugar (2.8mt annually) price to industry, long frozen but hiked in 2009-10, also announced today, could spell an additional outgo of around Rs 2500 crore for the Centre
which buys from mills at subsidised rates for its welfare programmes.

But it would allow higher liquidity to the industry, which has had to supply bank guarantees on the ethanol front and higher borrowing limits to mills to facilitate early clearing of cane payment arrears to farmers.

"With the prediction of good production and to take the advantage of good international prices, the government has already permitted exports against the pending ALS obligations....minister Pawar said, minutes after ISMA outgoing president Vivek Saraogi pointed out dismally that the window of opportunity for exports only extended upto Feburary when Brazils sugar came into the market and changed the price profile.

Global white sugar prices, only around $695/tonne in Ocotber, are currently around $730/tonne reacting mainly to some recent reports of low (23.5mt) Indian sugar production in 2010-11.

The ministers announcement carefully skirted prevailing and rather significant diffenences in sugar production estimaets (24.5mt and 27mt in different quarters of the food ministry and 24.5mt by industry).It is this dispartity that resulted in record sugar consumer prices earlier this calendar year.

The modalities, Mr Pawar told the 76th AGM of the Indian Sugar Mills Association (ISMA), the national platform of private sugar mills, would be worked out by the month end. That would allow the industry whcih, for the first time in 15 years, finds itself in a situation of high domestic supply, tighter global supply and firm global prices, to start exports by early January.

This is a very welcome move and a pleasant and long awaited surprise, ISMA president Vivek Saraogi said. Others were awating keenly for the sectoral decontrol map but acknowledged grudgingly that this was better than nothing.

Industry has, however, thus far been able to only fulfill half the quota for exports under ALS (advanced license scheme) of one million tonnes and from ports for re-export. Besides, white sugar trading (Liffe) is relatively low and not considered a good enough indicator of global prices that sugar exported from India could fetch once exports start.

Trade insiders estimate a drop in price that exports will fetch at atleast $20/tonne frm the prevailing $730/tonne. Todays is clearly a cautious move on OGL exports of sugar compared to the two million tonnes available accordign to industry.

However, the Centre is keeping a close watch on production and should further exports be cnsidered feasible, it will also be linked with production, Mr Pawar said. In effect, the cautious decision to allow exports in stages could also have the purpose of keeping global prices shored up instead of caving in significantly.

It is also aimed at keeping consumer prices from shooting up to January, 2010 levels.. As reported by ET earlier, a review of overall sugar production projections, based on weekly reporting of sugar output by the industry put in place by the directorate fo sugar, is likely in January/early February. The decisions are, understood to have been made virtually overnight.

source: indiatimes