Export contracts for 45 lt of sugar in current season; good opportunity for sugar mills in global market till March

Sugar mills in the country have a good opportunity to earn in domestic and export markets both. They are getting prices up to Rs 40 per kg in the global market. The retail prices in the domestic market, too, continue to be at Rs 40-41 per kg. Only Indian sugar is available in the international market. Due to this, of the 60 lakh tonnes (lt) of export quota announced for the current sugar season (2022-23), 45 lt of sugar export contracts have been signed. Of this, 6 lt of sugar has even been exported. Currently, while sugar exporters are getting a price of Rs 4,000 per quintal for white sugar, raw sugar is fetching Rs 3,650 per quintal. The reason for higher prices and export contracts is that only Indian sugar is available in the global market.

Sugar industry sources say that India can avail of this opportunity only till March 2023, after which sugar from the world’s largest producer Brazil will hit the market. Besides, sugar from Thailand will also come into the market. Hence it will not be possible to get the current prices. While white sugar is selling at $540 per tonne (FOB), raw sugar fetches 19.6 cents per tonne.

The government has fixed the minimum selling price (MSP) for sugar in the domestic market at Rs 31 per kg. But the prevailing market prices of sugar in the market are Rs 40-41 per kg. The sugar industry says that it is a good time for the industry. While on the one hand, sugar is fetching good prices in the domestic market, exports are also attractive on the other. This is why export contracts have been signed for 45 lt of sugar. Even the sugar mills that are not exporting sugar have signed swap deals with exporters for 5 lt of sugar.

Most of the sugar exported from India is going to Asian countries only. Indonesia is the top importer with 20 per cent share in our exports. Next, Bangladesh imports 15 per cent of what we sell abroad. Seven per cent of the exports go to China. South Korea, Malaysia, Sri Lanka and African countries are among the other importers. Most of the raw sugar exports go to the UAE as it has refineries.

Sugar exports have gone up constantly in the last four years. 32 lt of sugar was exported in 2018-19, 59 lt in 2019-20, 72 lt in 2020-21 and 110 lt in 2021-22. 80 lt of sugar is likely to be exported in the current season (2022-23). The government has released a quota of 60 lt of sugar so far. Additional quota may be released in January after reviewing the production situation.

An increase in sugar export has improved the flow of revenue of the mills. This has also improved the situation of cane payments. An official from the Maharashtra sugar industry told Rural Voice that more than 99 per cent of cane price payments have been made there for the last season. Sugar mills in Uttar Pradesh (UP) owe most of the cane price payments in the country due for the last season. The Union Government has fixed the Fair and Remunerative Price (FRP) for sugarcane at Rs 305 per quintal for the current season. However, the government has also increased the recovery level for sugar to 10.25 per cent this year along with the increase in FRP. Farmers receive additional payments for recovery levels beyond it.

Besides, there has also been a rapid improvement in the revenue situation of the sugar mills due to an increase in ethanol production and long-term contracts being signed with oil marketing companies (OMCs). The oil companies are making payments to the sugar mills 21 days after the ethanol supply. An increase in exports and the sale of ethanol has substantially improved the liquidity of the sugar mills. It is due to this that the sugar mills diverted 45 lt of sugar for ethanol production last season, which may go up to 60 lt for the current season. Total sugar production is estimated at about 400 lt for the current season. This also includes sugar diverted to ethanol.