It has been a bitter year for the Indian economy, but sugar exports seem to have hit a sweet spot. Factors like high international prices, quarterly review of export quota by the government, and the opening up of new markets have helped the country push through sugar exports.
India's sugar exports are seen at a record high of 5.7-5.8 mln tn in 2019-20 (Oct-Sep), just short of the government's aim of 6.0 mln tn, experts said.
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The Centre is offering a total subsidy of 10.45 rupees on every kilogram of sugar exported, and has decided to give assistance even if mills export half of their allotted quota.
The government may even extend the time for exports till December from September, as it had done a year ago, to meet its export target.
Barring Apr-Jun, raw sugar prices on the IntercontinentalExchange, which is considered a key benchmark for global sugar prices, have been near 13.0-15.9 cents a pound in the current sugar season.
In Indian currency, it translates to 23.0-25.0 rupees per kg and with government's additional subsidy of 10.45 rupees, the return on exports have proved to be sweet for many sugar producers, who have fully used the opportunity to reduce their excess stocks.
In the previous sugar season, international prices were mostly in the range of 11.0-13.5 cents per pound.
In the domestic markets, ex-mill prices of sugar are hovering at 32-34 rupees per kg for the last few months.
"When the lockdown started, there was disruption at container ports because labour went away...but overall exports are going to be more than ever because price was just right," said a senior official with a Delhi-based exporting firm.
So far, sugar mills in the country have inked export deals for nearly 5.6 mln tn, and 5.2-5.3 mln tn has already been shipped out of the country.
The drought in 2018 in Thailand, which is the world's second largest exporter, also led to a shift in demand from the south East Asian nation to India. The dry conditions in Thailand have led to a sharp dip in sugarcane production and ultimately sugar. Consequently, Indonesia, which mainly imports sugar from Thailand, turned to India and even relaxed its import quality norms.
Indonesia modified the International Commission for Uniform Methods of Sugar Analysis or colour standard for import of raw sugar to 600-1,200 from 1,200.
"Thailand's disappearance and Brazilian sugar reaching late to the markets has helped India. Destination markets are hungry for exports, talk of Indonesia, talk of Bangladesh, China...," said Prakash Naiknavare, managing director of National Federation of Cooperative Sugar Factories.
Brazil is the world's top exporter and producer of sugar. Sri Lanka, Iran, Iraq, Afghanistan, Somalia, Malaysia and Yemen are the other destinations for Indian sugar.
The government also left no stone unturned to push sugar exports as it reallocated the quota relinquished by mills to others that met certain conditions set by it.
"Redistribution of quota among sugar mills which are willing to export beyond their MAEQ (Maximum Admissible Export Quantity) would be done on pro-data basis to their MAEQ, subject to a maximum ceiling limit of the quantity requested by them," food ministry had said in a circular to sugar mills.
The reallocation has been done thrice on a quarterly basis during the current season and the last reallocation is due this month.
Further, depreciation of the Indian currency by 2.4% so far in the calendar year has also played an important role in sugar exports.
"There were some hiccups here and there but Indian rupee was helping, it went up to 75.75 rupees, so that helped a lot. Then, prices were good of low quality whites...that was a major reason for triggering exports," said an official with a British multinational commodity trading firm.
Since the beginning of August, the rupee has risen by over 2% and is currently at 73.10 rupees, but most contracts have already been tied up.
With the onset of the new sugar season just a few weeks away, the industry is anxious about the sugar export policy that the government has in mind for 2020-21. Exports of the sweetener are crucial as the country is holding excess carryover stock of 11.5 mln tn.
If you go by the chatter in government circles, then the food ministry is mulling a subsidy scheme of up to 6 mln tn sugar exports for 2020-21 as well. This comes after the finance ministry in June asked the other departments to avoid seeking approval for any new schemes for the current financial year.
At a time when the economy needs attention more than ever and every penny seems to matter, it will be interesting to see how far the government can support an industry that has become used to policy crutches for viability. End
US$1 = 73.34 rupees