Sugar companies eye exports to Iran, Pakistan; domestic industry still worried about cane arrears of 22,900 crore
The Indian sugar companies are eyeing exports, including those to Iran and Pakistan, for profitability amid another glut season. Nonetheless, the domestic sugar industry is worried about mounting arrears for the season and has sought that the minimum sale price (MSP), which currently stands at Rs 31 per kg, be hiked without any delay.
Lucknow / Apr 1, 2021
In the backdrop of 18 per cent higher sugar production at nearly 28 million tonnes (MT) till March 31, 2021, compared to the corresponding period last year, the Indian sugar companies are eyeing exports, including those to Iran and Pakistan, for profitability amid another glut season.
According to the Indian Sugar Mills Association (ISMA), the Indian millers have “responded well” to this year’s export programme although the Maximum Admissible Export Quota (MAEQ) was announced only three months back in December 2020.
“The market reports are encouraging, which indicates that contracts of 4.5-4.6 MT have been made so far. Further, reportedly delayed start of mills in CS (Central South) Brazil for 2021-22 season, which begins on April 1, 2021, may further improve the chances of enhanced contracts in the next 1-2 months,” ISMA said.
The Centre is also learnt to be working to find alternate currency exchange options to facilitate sugar exports to Iran. At the same time, the mills are also availing of the provision of swap between MAEQ and domestic quota for the current 2020-21 sugar season, and so far 0.88 MT of reallocations have been done under this category.
Besides, the Pakistan government has allowed the import of 0.5 MT of sugar, and recently permitted imports from India as well. “This resumption of sugar imports by Pakistan will open another market for sugar from India and help ensure that the target of 6 MT of sugar exports is met by September 2021,” the Association added.
Nonetheless, the domestic sugar industry is worried about mounting arrears for the season and has sought that the minimum sale price (MSP), which currently stands at Rs 31 per kg, be hiked without any delay.
Quoting a statement put out by the Centre, ISMA claimed, as of February 28, 2021, domestic cane dues stood at Rs 22,900 crore in the current season compared to Rs 19,200 crore in the same period last year.
The sugar companies believe the prevailing low ex-mill sugar prices for the last several months, has adversely affected the liquidity of mills and their ability to pay the fair and remunerative price (FRP) to cane farmers.
Now, the sugar sector is hoping for an early announcement regarding an increase in MSP of sugar to improve revenue realisation by mills, and for prompt payment to farmers for cutting down on the mounting cane dues.
“Otherwise, it is feared that if the current situation persists, then cane price arrears will jump very fast to alarming levels,” ISMA warned.
This year, 503 sugar mills pan-India participated in the cane-crushing operations compared to 457 mills last season. So far, 282 mills have completed their operations and shut for the season.
In Maharashtra, sugar production till March 31, 2021, stood at about 10 MT compared to 5.9 MT produced last year. The state mills have crushed about 96 MT of cane, which is the highest ever in the history of the state, surpassing 95.4 MT crushed in the entire 2017-18 season.
The reason for lower sugar production, despite higher crushing, as compared to 2017-18, is the lower recovery and the diversion of cane juice/B-heavy molasses for ethanol production in the current season.
In Uttar Pradesh, 120 sugar mills which were in operation, have produced almost 9.4 MT of sugar so far, while 39 units have stopped crushing operations. Interestingly, UP and Maharashtra account for more than half of the country’s annual sugar output.
Meanwhile, mills in other major sugar-producing states such as Karnataka, Gujarat, Tamil Nadu, Andhra Pradesh, Telangana, Bihar, Uttarakhand, Punjab, Haryana, Madhya Pradesh, Chhattisgarh, Rajasthan and Odisha also contributed to the domestic production.
However, mills in Bihar, Chhattisgarh, Telangana, Rajasthan and Odisha have already closed their crushing operations for the current year, while others except those in Haryana are on the verge of closure shortly.
(Virendra Singh Rawat is a Lucknow-based journalist who writes on contemporary issues of industry, economy, agriculture, infrastructure, budget etc.)