Govt releases 2.5 million tonnes of sugar for export, leading to profit.

The Union government's order to release 2.5 million tonnes of sugar for exports in the sugar season 2011-12 ending September 2012 and the rupee depreciation is increasing the profitability of the sugar factories.

The release order has been over and above the free sale sugar quantities. Now that India has exportable surplus, there is no need to import sugar. The rupee depreciation is also helping the sugar exporters, Mukesh Kumar, executive director, Vishwanath Sugar & Steel Industries Ltd, told FnB News.

The sugar production of India, which is the world's second largest producer and largest consumer, is estimated to grow on a year-on-year basis. The annual domestic demand for sugar is expected to touch 22 million tonnes which leaves a surplus of two to three million tonnes on an average. The government has decided to remove quantitative restrictions on exports. With a boost in capacity generation and de-control in the sugar industry, we believe that the country is poised for phenomenal growth, he added.

The area under sugarcane has increased from 4.2 million hectares during the sugar season 2009-10 to 5.1 million hectares in 2010-11. The need now is not only to increase the area under sugarcane cultivation but also to substantially raise the yield per hectare, stated the Vishwanath Sugar executive director.

The Indian sugar industry has emerged as one of the net exporters of sugar. The prospects for the next decade are excellent and India can achieve further significant increase in the sugar production if the government adopts the Brazilian model. The country’s competitive edge lies in its geographical location which offers convenient transport, he said.

But the country needs to overcome three major challenges which are production costs, technology, and government policies on development of alternative energy. The industry expects complete liberalisation of the sugar sector and improved realisations with the removal of levy quotas and monthly releases, he said.

The sugar industry is one of the most controlled industries in the country and as a part of the economic reforms it should be decontrolled at the earliest, stated Kumar.

In fact, the government has already appointed a committee under the chairmanship of Dr C Rangarajan to study the road to deregulation of the industry. The committee is expected to submit its recommendations shortly before the beginning of the next sugar season. India has already handled surplus quantities of sugar after meeting growing consumption. The government has to make sure the growing population will be supplied with enough sugar at reasonable prices and still leaving exportable surplus, he said.

The domestic sugar prices are on par with the global prices. The rise in domestic sugar prices will be short-lived as production is estimated higher for this year. Overseas prices are not likely to move higher this season, stated Kumar.

Source : fnbnews.com