Global prices in mind, 5 LT sugar export allowed.

NEW DELHI: The sugar industry can finally heave a sigh of relief on exports front with food and agriculture minister Sharad Pawar announcing on Wednesday that the Centre will allow exports of half million tonnes of sugar.

A Rs 90/quintal hike in levy sugar (2.8 million tonnes annually) price to industry, long frozen but hiked in 2009-10 , also announced on Wednesday, could spell an additional outgo of around Rs 2,500 crore for the Centre which buys from mills at subsidised rates for its welfare programmes.

But it would allow higher liquidity to the industry, which has had to supply bank guarantees on the ethanol front and higher borrowing limits to mills to facilitate early clearing of cane payment arrears to farmers.

"With the prediction of good production and to take the advantage of good international prices, the government has already permitted exports against the pending ALS obligations,” Mr Pawar said, minutes after ISMA outgoing president Vivek Saraogi pointed out dismally that the window of opportunity for exports only extended up to February when Brazil’s sugar came into the market and changed the price profile.

Global white sugar prices, only around $695/tonne in Ocotber, are currently around $730/tonne reacting mainly to some recent reports of low (23.5 million tonnes) Indian sugar production in 2010-11 . The minister’s announcement carefully skirted prevailing and rather significant differences in sugar production estimates (24.5 million tonnes and 27 million tonnes in different quarters of the food ministry and 24.5 million tonnes by industry).It is this disparity that resulted in record sugar consumer prices earlier this calendar year.

The modalities, Mr Pawar told the 76th AGM of the Indian Sugar Mills Association (ISMA), the national platform of private sugar mills, would be worked out by the month end. That would allow the industry whcih, for the first time in 15 years, finds itself in a situation of high domestic supply, tighter global supply and firm global prices, to start exports by early January.

“This is a very welcome move and a pleasant and long awaited surprise,” ISMA president Vivek Saraogi said. Others were awaiting keenly for the sectoral decontrol map but acknowledged grudgingly that this was better “than nothing.”

Industry has, however, thus far been able to only fulfil half the quota for exports under ALS (advanced license scheme) of one million tonnes and from ports for re-export . Besides, white sugar trading (Liffe) is relatively low and not considered a good enough indicator of global prices that sugar exported from India could fetch once exports start.

Trade insiders estimate a drop in price that exports will fetch at at least $20/tonne from the prevailing $730/tonne.

Source : economictimes.indiatimes.com