Indian sugar mills association

Sugar Export to Pick Up as Centre Relaxes Rules

Date:	28 Mar 2012

Source:	The Economic Times

Reporter:	Jayashree Bhosale

News ID:	1017

Pdf:	positive_vibes.pdf
Nlink:

The government has relaxed rules for sugar exports after red tape kept 70% of the quota locked within the country and put pressure on mill cash flows. Mills that had been trading old export licences to make a quick buck will find them virtually worthless after 10 lakh tonne was allowed to be shipped on first-come-first-serve basis. Sugar stocks rose following a government decision to export the third tranche of 10 lakh tonne in 2012 and were trading 2-6% higher on the Bombay Stock Exchange. The government was till now allocating export quota to every mill based on its production during the previous three years. The EGoM on Monday decided to do away this system. Though there is no clarity on the alternative, the industry believes that unrestricted exports would be permitted. Monday’s decision to allow exports under the open general licence (OGL)-VI plan is expected benefit mills in Maharashtra, Karnataka, Tamil Nadu and Gujarat. “The decision of allowing unrestricted exports is positive for the mills which are actually exporting. Net realisation for exporting will improve now as exporters do not have to pay for licences. This will also help domestic market prices -- which is our main concern -- to go back to where they were in December 2011,” said Narendra Murkumbi, managing director, Shree Renuka Sugars, the largest sugar refiner in the country. Mills in coastal states are particularly happy about the decision. “It is good that the quota system has been done away with. This will benefit state like Maharashtra, Karnataka and Tamil Nadu which are sugar surplus. The landlocked sugar mills were getting higher export realisation in the quota regime as their domestic sugar price is higher. Doing away with quota will bring parity between the coastal mills and the landlocked mills,” M Manickam, vice chairman and MD, Shakti Sugars. With the government deciding to do away with the quota for individual mills, the industry expects faster shipments. “The quota system was introduced at a time when the difference between international prices and domestic prices was at Rs 6,000-8,000 per tonne to ensure equity among mills. But as there is a difference of about only Rs 1,000/ tonne between the two now, there is no logic in continuing with the quota system,” said the chairman of a private mill from Tamil Nadu. He added, “The quota system slowed physical exports considerably. Today, the main issue is that sugar should go out and keep domestic prices firm which are falling continuously.” Murkumbi said the decision of removing the quota will help in shipping the volume within the next 90 days. From the OGL-V plan, release orders are yet to be issued for about six lakh tonne sugar and these are expected to be added to OGL-VI plan. Indian Sugar Mills Association (ISMA), the sugar industry body, has called for allowing export of 10 lakh tonne more. In its official response, ISMA said: “The government can easily allow another 1 million tonne of sugar exports within the next 15 days looking at the comfortable stock position in the country. This will clear cane arrears which are threatening to cross Rs 10,000 crore by April. It will be a daunting task for mill owners to clear the arrears unless fresh cash flow is generated.” ISMA has said there is more demand for raw sugar in the international market. If permission is available by the end of March for further exports, mills could produce raw sugar before they shut their operations by mid-April.

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