Sugar mills in Southern and Western India will immediately stand to benefit from the Government's move to do away with curbs on exports.
Proximity to ports will help millers in Maharashtra, Karnataka and Tamil Nadu to ship out more sugar quickly than their counterparts in the land-locked Northern States over the next few weeks once the Food Ministry notifies the new export rules.
The Government on Wednesday decided to remove quantitative restrictions on sugar exports including doing away with the release order mechanism. Following India's move to export more, the global sugar prices have depressed further and the prices were likely to remain subdued ahead of the exports from Brazil, which will begin this month-end.
Sugar prices have declined by $60-70 a tonne in the past one month. White sugar futures for August delivery on the London terminal were trading around $563.80 on Thursday, down from $576 a week ago. Similarly, the ICE July raw sugar futures in New York were hovering around 20.70 cents a pound. However, in domestic market, the prices have turned bullish on higher exports.
Advantage south
Millers in South have the advantage of lower transportation costs because of their proximity to ports. Besides, the ex-factory prices in Maharashtra and South are lower are lower by Rs 1,000-2,000 a tonne due to lower cane prices and higher recovery.
“Though the millers in South will be the first to move out sugar physically, there's no reason that prevents the northern millers from getting into the export system. They can take advantage of the higher premium on refined sugar,” said Mr Abinash Verma, Director-General, Indian Sugar Mills Association. The high quality refined sugar is mainly produced by the millers in North.
So far India has exported about 2.6 million tonnes of sugar in the current year, including the carry forward quotas. “Another 2 million tonne could be exported till December at an average of around 3.5 lakh tonnes a month over the next five-to-six months,” Mr Verma said.
Weakening rupee
The rupee, which has weakened further against the dollar, will sweeten the exports. The rupee ended lower at Rs 53.23 on Thursday, a decline of 5 per cent about a month ago. India exports sugar mainly to West Asia, Africa and Sri Lanka among other countries.
India has so far produced 25.1 million tonnes of sugar. Cane crushing in UP has almost come to an end, while it is expected to go on in Tamil Nadu till September. The southern States are expected to produce about a million tonne more in the coming months.