Food Secretary Sudhir Kumar stated on Thursday that the Centre would take a call on extending the export incentive for raw sugar soon. The matter has been under examination for weeks with the industry reiterating the need for the extension against a backdrop of sliding prices in an arena of rising production costs and excess supply.
The incentive was approved in February-March by the Government for the 2013-14 and 2014-15 seasons and had been in place till September. The scheme, reviewed every two months, provided a subsidy between Rs. 2,277-Rs. 3,371/tonne of raw sugar. Around 700,000 tonnes of raw sugar was shipped under the scheme last season which ended on September 30.
“Our assessment of the present stock and the production estimate for the year took some time. Now that there is clarity and we’re heading in the right direction, there will be a decision,” said Kumar at the 80th Annual General Meeting of the Indian Sugar Mills Association (ISMA).
He added that the Government estimated the 2014-15 season opening stock to be 72 lakh tonnes (lt) and had pegged ending stock at 74 lt.
Brazilian sugar
Industry officials, however, are worried that the Government might have moved a little late. With global crude prices falling, some felt, more sugar may be produced in Brazil, the world’s largest sugar producer, in place of ethanol.
“On the international front, due to the steep fall in oil prices, there is clear possibility that what might happen in Brazil is the shift from ethanol to sugar production. With the Brazilian real falling, the price of Brazilian sugar will be so cheap that it will threaten to come into India and despite the import duty, it will be cheaper than Indian sugar,” said A. Vellayan, Executive Chairman of the Murugappa Group that runs EID-Parry.
Vellayan, who took over as President of ISMA on Thursday, said that domestic mills were being forced to sell to international traders in forward markets at cheaper prices to generate cash flow. “They are selling February-March’s product today to be able to pay farmers. Exports have not yet started and banks are hardly lending to mills. It is an unviable situation,” he said.
“We don’t see oil prices rising for another 6-8 months during which time Brazil have a new crop. So with a decline in oil prices, it’s a possibility that more cane will go into sugar and less into ethanol,” said Tarun Sawhney, Vice Chairman and Managing Director, Triveni Engineering & Industries Ltd.