NEW DELHI – There is a window for India to export 6 mln tn sugar in the coming season starting October as global prices are firm, and major producers Brazil and Thailand are staring at weak production. This opportunity hinges on the government announcing export subsidy by next month, says Indian Sugar Mills Association Director General Abinash Verma.
INTERVIEW
"We can attempt to export 6 mln tn again, considering that the world market should again give an opportunity to Indian sugar producers to export from the beginning of the season, till the Thai sugar and later Brazilian sugar comes into the market in January and April, respectively," says Verma in an interview to Informist.
India has 4 mln tn of extra carryover stock and is likely to have surplus production next season, making it imperative for the government to announce export sop fast, Verma said.
The Centre provides mills with an assistance of 4-6 rupees per kg to help export surplus sugar, and this in turn helps mills clear dues to cane farmers.
The request to hasten up the export sops comes after last year's dilly dallying by the government. The Centre had announced the sugar export policy only by mid-December, much later after the season had started, due to weak state of its finances.
But this year, it exports are a low hanging fruit as the dry spell in Brazil and Thailand could pull global sugar production lower by as much as 15 mln tn in 2021-22 (Apr-Mar) season. This could translate into a 5 mln tn deficit in the global market.
"This will keep the world sugar market bullish for some time," he said. "The raw sugar prices would remain at and around the current levels, with a bias to move up, than down."
The most-active October contract of raw sugar on the Intercontinental Exchange had touched a five month high this week.
Following are the edited excerpts of interview with Verma:
Q. There are reports of weak sugar demand in the domestic market. Is this true?
A. There is some misunderstanding in the market that demand of sugar fell in the last few months. The actual situation is different. Sugar sale as reported by mills in their monthly returns during March-May was on an average 2.2-2.3 mln tn in each month despite COVID infections peaking in the country and state lockdowns.
Total sale in the current season from Oct-May was 17.49 mln tn, which is about 5% higher than last year. ISMA expects total sugar consumption to be over 26.0 mln tn in 2020-21 (Oct-Sep), as against 25.3 mln tn in the previous season.
The numbers speak for themselves, and suggestions about lower sugar demand is incorrect. In fact, it is expected that sugar sales may be even higher than 26 mln tn.
Q. India has exported record-high sugar this season. How much will it be able to export next season?
A. With an estimated opening balance of 8.5-9.0 mln tn of sugar for 2021-22 sugar season, we will already have about 4 mln tn of surplus on Oct 1. Field reports do confirm that next season too will be a surplus sugar season.
We can attempt to export 6 mln tn again considering that the world market should again give an opportunity to Indian sugar producers to export from the beginning of the season, till the Thai sugar and later Brazilian sugar comes into the market in January and April respectively. We would request and expect the government to announce the sugar export programme in July or early August.
Q. Are exporters looking to ink deals with potential, untapped countries in international markets? If yes, which ones?
A. India has successfully exported 6.0 mln tn of sugar in 2019-20, and now we expect to export 6.7-6.8 mln tn in 2020-21. Asian countries in West Asia, African countries in the eastern part of the continent, Sri Lanka, Afghanistan, and Bangladesh have all been our traditional markets.
In the last couple of years, we have successfully exported large quantities of sugar to Indonesia and Malaysia, and would continue to do so. We are confident that we will be able to export 6 mln tn to these countries again in next season too.
Q. What is your view on global raw sugar prices in the near term?
A. Considering that the two largest sugar exporters in the world--Brazil and Thailand--have had a dry season and would together be producing 15 mln tn less than last year, there is a significant deficit in the global market. With crude oil prices also on the higher side, giving an opportunity to Brazil to produce more ethanol because of better prices, the global raw sugar prices are expected to remain on the higher side as compared to previous years. The raw sugar prices would remain at and around the current levels, with a bias to move up, than down.
Q. Sugar production in Brazil is seen lower this season. How will it impact the world sugar market?
A. Brazil's sugar production has a direct impact on total sugar availability globally, and accordingly on global prices. Sugar production in Brazil is expected to drop by around 7 mln tn, contributing to the deficit in the global sugar availability. The sugar production glut, which the world has witnessed for the last couple of years, has now turned into a big deficit of around 5 mln tn. This will keep the world sugar market bullish for some more time.
Q. Do you think ethanol programme in India will be able to sustain the sugar sector in the long run as major economies are gradually shifting towards electric vehicles to curb carbon emissions?
A. India's ethanol blending programme still has a long way to go, and has a very bright future. Prime Minister Narendra Modi recently released the roadmap for ethanol blending programme in the country... has guaranteed that there will be no shortage of demand.
The other advantages of ethanol like reduction in net oil import bill, better and timely remuneration to farmers, reduction of surplus sugar and reduction in vehicular emissions/pollution which in turn improves air quality, are so significant that ethanol production and use in India will continue to be encouraged.
Electric vehicles are new-age technology and surely beneficial for the environment. Current batteries mainly require three metals--lithium, cobalt and nickel. There is not much availability of these metals across the globe, and most of it is concentrated in Bolivia, Chile and Congo, and 60% of that too are mainly under Chinese ownership. With the current technology, it will be a huge challenge to scale up production of batteries for larger production of electric vehicles. There will also be challenges on setting up enough charging stations to charge EV batteries, especially in Tier-II or III cities, smaller towns and rural areas. India is still largely dependent on non-renewable sources of energy, and therefore the electricity that will be required for charging the batteries will actually be causing pollution elsewhere, during its generation.
We feel that success of electric vehicles, whenever we reach there, will challenge and replace fossil fuel--petrol or diesel, and not ethanol, which is another green, renewable and environment friendly fuel, directly helping the Indian farmers. Scaling up of EVs will take time and till then ethanol use will increase in the country very rapidly, and like Brazil, can go up to 45-50% of petrol consumption.