Current year expected to end with a high closing stock of 14.5 MT; industry urges government to facilitate higher exports

It is one of the unprecedented years for the sugar industry in the country, as the sugar season of 2018-2019 is expected to end in September with a high closing stock of nearly 14.5 million tonnes. Though sugar production in the next season might be lower compared with the current one, the focus of the industry and the government will largely be on reducing the inventory.

The estimated sugar production this year (October 2018 to September 2019) is 32.9 million tonnes as against the domestic consumption of 26 million tonnes. Exports are likely to be three million tonnes, according to data available with the Indian Sugar Mills’ Association (ISMA). The government had targetted five million tonnes for export.

Sugar exports will have to continue next year too and the government should facilitate higher exports, say industry sources.

With deficit rains, sugar production may drop next season in Maharashtra and north Karnataka.

Even if there is a decline next year, the association expects the total production to be higher than the consumption. The 2019-2020 season will commence with an opening stock of 14.62 million tonnes, one of the highest. As sugar will start flowing into the market in the new season only from mid-November, it is better to retain two months’ stock (about five million tonnes). So, about seven million tonnes should be exported next season and the government should come out with a policy for this in July 2019. Only then, the mills can plan and go ahead with contracts, says Abinash Verma, Director General of ISMA.

International price

International price for sugar (white sugar) in the current season is nearly ₹10 a kg less compared to the domestic price. In an effort to encourage exports and to make it attractive, the government had not only fixed mill-wise export quota, but also linked some of the subsidy schemes to exports.

Yet, almost 35% of the industry did not participate for various reasons such as lack of adequate production or stringent conditions to avail the subsidy.

As such, the industry has suggested to the government to make the export quota as an industry-wide quota, rather than mill-specific, and to modify the subsidy schemes, so that they are WTO-compatible. “There are mills that are unable to meet the export quota and some mills that want to export more than the quota. So, the government should leave it open,” says Mr. Verma.

On the international front, next season, a deficit of nearly four million tonnes is expected. But its impact on the price will be known only later. If the norms are relaxed for the subsidy schemes, more mills will get into exports. There will be no delay in getting the subsidy and the cash flow will improve for the mills. In March this year, the cane arrears pending for farmers was expected to be almost ₹30,000 crore. This should be lesser now. “The policies of the government should attempt to solve both problems — cane price payment and sugar inventory,” according to ISMA.

Industry sources point out that the production cost works out to ₹34 a kg, while the minimum selling price in the domestic market fixed by the government is ₹31 a kg. Apart from revising the minimum selling price upward to ₹35 a kg, it should come out with a revenue-sharing formula for cane price. If India should export sugar, it should be competitive.

In Tamil Nadu, the industry points out that the support schemes of the Central Government are all oriented to surplus production States. The mills in Tamil Nadu, numbering about 40, face a peculiar situation of low capacity utilisation (35%) due to reduction in cane production. The mills cannot export sugar as the production (8.5 lakh tonnes) is not adequate even to meet the domestic needs of the State (18 lakh tonnes).

Tamil Nadu was the third or fourth largest producer of sugar in the country five years ago, with an annual production of 23 lakh tonnes. Now, it is just one-third of that. “We have created capacities and invested substantially. Tamil Nadu mills should be exempted from the mandatory exports and the norms for subsidy schemes should be relaxed to benefit the mills in the State,” says Palani G. Periasamy, chairman of the South India Sugar Mills’ Association.