Govt likely to restrict sugar exports to 50 lt due to less production in UP; notification to be issued soon

The government is exercising caution with regard to sugar exports in the new sugar season (SS) 2022-23, starting October, after a record sugar production (including sugar used for making ethanol) of 395 lakh tonnes (lt) and record exports of 112 lt of sugar so far in the current sugar season (October 2021-September 2022). Due to this, the government is likely to allow only 50 lt of sugar exports in the coming season. According to sources, a notification may soon be issued in this regard.

In fact, the government wants to avoid in the case of sugar a situation like the ones it was faced with when it had to prohibit wheat exports on May 13 after making tall claims earlier and later when on September 8 it had to similarly prohibit exports of broken rice and impose a 20 per cent customs duty on non-Basmati rice exports. Industry sources say that the sugar production in Uttar Pradesh (UP) may come down to 90-100 lt amidst the current circumstances and this is a major reason behind restricting sugar exports to 50 lt.

The opening stocks of sugar for the new season on 1 October 2022 are estimated to remain at 60 lt, a five-year low. However, this is equivalent to what the country requires for about two-and-a-half months.

According to sugar industry estimates, sugar production in the coming SS 2022-23 is projected to be in the range of 330-360 lt. Besides, about 45 lt of sugar is estimated to be used in ethanol production. Combining the remaining stocks of 60 lt along with the sugar produced, a total of 390-420 lt will likely be available in the coming year.

According to sources, any decision on further quantities to be exported would be taken in January-February 2023 after a review of domestic production and price trends. UP is not on a good wicket in terms of production. Having been the largest producer of sugar for five years in a row, UP now lags substantially behind Maharashtra. In the current season, sugar production in UP came down to 102.50 lt while that in Maharashtra went up to 137.30 lt. A deficiency of 43 per cent in the rainfall in UP in the current monsoon season has had an adverse effect on sugarcane production. According to the UP sugar industry, the cane crop is affected by red rot, a fungal disease, in the entire state this year. The effect of the disease is less at some places in the state but high at others. Industry sources say that amidst these circumstances, the sugar production in UP may fall down to 90-100 lt. However, at a national level, lower production in UP is likely to be offset by increases in Maharashtra, Karnataka and Tamil Nadu. Sugar consumption is estimated at 275 lt in the country in the coming year.

Sources say that given the sort of hike in the food inflation rate seen in the latest inflation figures, the government does not want to take any sort of risk. While the retail inflation rate has been 7.62 per cent for August, the wholesale inflation rate was 13.93 per cent in July and has continued to be double digits for the last 17 months.

Speaking to Rural Voice about the decision likely to be taken by the government, Prakash Naiknavare, Managing Director, National Federation of Cooperative Sugar Factories (NFCSF), said that the government's decision to release the sugar export quota in a phased manner was logical. Besides, the government is giving an opportunity to the sugar mills to enter into export contracts in the global market even before the season starts. It is in November around Diwali that the crushing season starts in sugar mills, but they can enter into contracts before this. Timely contracts are to our advantage. The season in Brazil, the largest producer of sugar in the world, starts in April and it is only after that that its sugar reaches the global market. So, the time from October to April-May that we have is good for exports.

According to Naiknavare, “The government has already sounded us out that mills can sign export contracts up to 15 per cent of their production. We have conveyed this to our members.”

As per the sources, sugar mills have begun signing export contracts.   On 24 May 2022, the Modi government at the Centre had moved sugar exports from the “free” to “restricted” category. It also capped total exports for the current (2021-22) sugar season, ending September 30, at 100 lt, but this was raised to 112 lt with effect from August 1. Sources say that the notification for 50 lt of sugar exports for the next season may soon be issued. Besides, it is hoped that the government may allow an additional 30-35 lt of sugar exports in February 2023.

The government has exported 112 lt of sugar in the current season without any subsidy. The reason behind this has been the higher sugar prices in the international market, which have been driven by drought in Brazil and a decline in production in Thailand. This year, too, drought in the European Union (EU) will lead to a decline in its production. That is why the sugar price for December delivery is running at $538 per tonne at present. For Indian sugar, this price is $488 per tonne, which amounts to about Rs 39,000 per tonne. If you deduct expenditures like transportation, bagging, handling and port charges from this, sugar mills are getting ex-mill prices of Rs 35,500 per tonne, which is higher than the current prices in the domestic market. S-grade sugar is priced at Rs 34,000 per tonne in Maharashtra at present.

Sugar exports from India stood at a mere 46,000 tonnes in 2016-17, which climbed up to 6.32 lt in 2017-18, 38 lt in 2018-19, 59.40 lt in 2019-20, 71.90 lt in 2020-21 and 112 lt in 2021-22.