The Directorate General of Foreign Trade (DGFT) in a fresh Policy Circular No. 8 dated 24th December, 2012, has opened up sugar exports under OGL by obtaining Registration Certificates. The Circular mentions that exporters desirous of exporting sugar may continue to obtain Registration Certificates accordingly, without mentioning any last date.
The Prime Minister in May 2012 had opened up sugar exports in view of surplus sugar production and deteriorating financial health of sugar mills. The sugar mills were allowed to export only till 30th September, 2012 for the 2011-12 sugar season.
The sugar mills, facing mounting cane arrears and losses due to high cost of production, grabbed the opportunity with open arms, and exported around 9-10 lakh tons of sugar in that period. But soon after that, the international prices dipped in the major sugar export market, making exports unviable. The international prices which were quoting as high as 644 dollar per metric tons at LDP (White Sugar) and at 24.58 cents per lb for Raw Sugar at New York in April 2012 dipped today to 523.70 dollar per metric ton for white sugar in London and 19.51 cents for Raw Sugar in New York market. Clearly the international prices have dropped significantly. The sugar mills are not in an advantageous position anymore to export the remaining sugar out of the country.
The Government should have allowed unrestricted sugar exports as early as January, 2012, or in the first half of 2011-12 sugar season, instead of allowing just 10 lakh tons of sugar exports, when the international prices were favourable. The white sugar in London market quoted as high as 657.70 dollars per metric ton in January 2012. The raw sugar was at 24.96 cents per lb in New York market, also in the same period. Clearly sugar mills missed the bus and failed to take advantage of the huge international demand to export whatever quantity was possible.
The Government failed to understand the international market and its cane estimates also failed to indicate a surplus sugar production. ISMA had already projected surplus sugar production at 260 lakh tons as early as August 2011, but Government failed to read it and apply it to the country’s advantage. The sugar export order in May 2012 was too late; the international prices already started cooling down by then.
This is a best case scenario for sugar decontrol and freeing of export-import policy by the Government. A conservative Government policy which fails to attune itself with changing dynamics cannot be in the best interest of all the stakeholders- sugar mills, farmers and consumers.
The Government should let the industry decide the time and quantity of sugar exports it wants to do, so that it can earn crucial foreign exchange to pay the farmers on time, reduce its high inventories and invest in Research and Development of the sector.