Despite subsidy, sugar exports fail to pick up

As excess supplies continue to weigh on global sugar prices, the raw sugar subsidy announced by the Government in mid-February this year has not helped millers or farmers, as exporters find it difficult to ship out the commodity.

With the domestic production of sugar for the 2014-15 season entering the last leg, cane arrears have increased to over ₹17,000 crore, as millers struggle to pay even the fair and remunerative price (FRP) of ₹220 per quintal. In Uttar Pradesh alone, arrears are close to ₹10,000 crore, while in Maharashtra, they are over ₹2,500 crore and Karnataka at over ₹3,600 crore (including previous year’s ₹1,050 crore).

“The ex-factory prices have touched rock bottom on rise in output, excess stocks and low global prices,” said MG Joshi, Managing Director, National Federation of Co-operative Sugar Factories Ltd.

Ex-factory prices in Maharashtra are hovering around ₹2,200 per quintal, while in Uttar Pradesh they are around ₹2,400 per quintal. For every quintal, millers in Maharashtra are losing around ₹500.

Joshi said the Government should immediately create buffer stocks, a move that could lift prices, besides interest-free loans to assist millers, who are facing tough times.

The Indian Sugar Mills Association (ISMA), the apex body of private millers, said that despite Government providing assistance of ₹4,000 per tonne for exports of raw sugar, shipments were not happening due to low global prices.

“We tried exports, but that has not worked out. We now basically want the Government to help us dispose of the 25 lakh tonnes of surplus sugar that's depressing the prices. The Government can purchase the surplus, create a buffer stock and intervene when the market turns favourable. If the Government takes away the surplus, prices could stabilise and help the industry with cash flows,” said Abinash Verma, Director General, ISMA.

The drop in futures for raw sugar in the New York market has resulted in prices plunging to the lowest in the last seven years. Besides, the depreciating Brazilian real against the dollar has helped exporters in the world’s largest producer liquidate their stocks. While some 14 lakh tonnes of raw sugar were expected to be exported after the subsidy announcement, not even two lakh tonnes have been shipped out, Joshi said.

The Brazilian real has declined by 10.5 per cent against the dollar since February 20, when the Government decided to extend a subsidy of ₹4,000 per tonne.

Abhijit Ghorpade, an exporter based in Kolhapur, said there’s hardly any parity as the refined sugar of 45 Icumsa in the global market is trading at levels lower than Indian whites. Also, there is hardly, any big buying happening in the domestic market.

Meanwhile, sugarcane growers in Karnataka are trying to meet Prime Minister Narendra Modi in Bangalore on Friday on the sidelines of the ongoing National Executive Committee meeting of the Bharatiya Janata Party to present a memorandum and impress upon the issues faced by farmers.

“The mills are not even paying the FRP. We want the Prime Minister to intervene at the earliest,” said Kurubur Shantakumar, Convenor of the Cane Growers’ Association.