Exporting sugar is still a sweet deal for Indian exporters despite the recent decline in global prices. The impact of such a decline is partially offset by the weakening rupee against dollar.
Sugar prices have slid by about $60 a tonne in the past one month on expectations of higher cane output in Brazil, the largest producer of sugar. Conab, the Brazilian crop forecaster, has estimated sugar output at 38.9 million tonnes, about two million tonnes higher than last year.
“Prices which were ruling around $645 during March-end are now $585-590 a tonne. The decline in rupee is helping us offset the impact,” said Mr Abinash Verma, Director-General of Indian Sugar Mills Association.
White sugar futures for delivery in August on the NYSE Liffe on London terminal settled at $576.80 on Friday against $621 on April 11.
Against the decline of 8-10 per cent in global sugar prices in recent weeks, the rupee has weakened against the dollar by about 4 per cent in April.
Premium quota
The export of sugar especially from the western parts of the country is still viable at the low prices. This is mainly due to fact that the ex-factory prices in Maharashtra are lower by Rs 1,500-2,000 a tonne compared with the North, Mr Verma said.
Tracking the decline in prices, the premium on export quota has also shrunk. The quota premium which ruled at a high of Rs 8,000 a tonne has now declined to around Rs 2,000 a tonne, sources in Kolhapur said.
Exporters are still able to realise margins or around Rs 1,500-2,000 a tonne. “It is better to export at these prices or else we'll have to incur holding and interest cost of around Rs 200 a quintal,” sources said.
The export quota is allocated by the Government to each factory based on their production performance of past three years. Sugar millers, mainly from North India sell such quotas at a premium to their counterparts in the West and South, who are better placed to export because of their proximity to ports.
A section of the millers have recently approached the Government to abolish the quota system and allow export shipments based on the first-cum-first-served basis. This issue is likely to be discussed at the upcoming meet of the empowered group of ministers.
In the current sugar year, the Government has so far allowed exports of 3 million tonnes under the open general licence. Of this, notification is yet to be issued for the one million tonnes approved on March 26. Sugar shipments, so far, would be around 2.6 million tonnes including the carry forward quota, Mr Verma said.