Indian trade houses vying for sugar exports due to bullish global demand and suppressed domestic prices
Exporters are getting Rs 1-2 per kg more than the minimum selling price (MSP) of Rs 31 per kg set by the government. However, traders said a large quantity of sugar is sold below MSP by the sugar mills due to surplus availability.
International raw sugar futures prices had touched a four-year high in February.
Millers are getting Rs 24.50-25 per kg ex-mill for raw sugar, said Maharashtra-based sugar broker Abhijit Ghorpade. Including the subsidy of Rs 6 per kg, the realisation from raw sugar export is equivalent to Rs 32 per kg, he said.
Increase in crude oil prices increases demand for ethanol made from sugarcane, which leads to contraction in sugar production.
The Indian government had announced its sugar export policy in January, allowing export of six million tonnes of sugar against subsidy. The government has allocated mill-wise export quota. This year, the government has allowed sugar mills to exchange their export quota with domestic market quota of other mills that do not want to export sugar.
Though there is good demand for Indian white sugar, shortages of containers have adversely affected its export. However, raw sugar, which is used by refineries for processing into fine grade white sugar, can be exported in loose bulk form in full vessels. Traders and brokers said that of the total sugar contracted so far, 80% is raw sugar.
The quota exchange policy has proved to be a win-win for millers from Uttar Pradesh and Maharashtra, top two sugar producers. Traders have been purchasing the export quota of sugar mills from UP at Rs 1,000-1,500 per tonne. Including the quota sale price, UP mills are marking good profit on increased domestic market sales, while Maharashtra mills, whose domestic markets have been captured by UP mills, are getting good returns from export of sugar, said traders.
They said deliveries of raw sugar from Brazil, the largest sugar producer, will begin only after mid-May, so demand for Indian raw sugar is intact. There is good demand for Indian sugar from Indonesia, Sri Lanka, Afghanistan, Africa and Iran.
Thanks to the profitability and good demand for raw sugar, a section of traders is trying to get an additional quota of a million tonnes exclusively for export of raw sugar. “Exporters are getting a smaller export window this year as we started exports from January instead of October, when the crushing season begins,” said Prful Vithalani, chairman, All India Sugar Traders Association. “Raw sugar can be produced only when the sugar mills are in operation. If we get raw sugar demand between April and September, we need to plan for it from now.”