Appreciation of rupee coupled with other factors has reduced the margins in sugar exports. Yet the mills are happy as the exports help them keep a cash flow to make cane payments and reduce the carrying costs of surplus sugar. The industry wants the government to allow next tranche of one million tonne export.
Earnings of the sugar mills from selling their export quota have decreased by 50% with appreciating rupee and slowing demand for sugar. The maximum realisation of the sugar mills during the three rounds of open general license (OGL) exports in the last was Rs 8/kg to Rs 9/kg. During the ongoing first round of OGL exports of one million tonne sugar however, the mills' earnings have dropped to Rs 2/kg to Rs 2.5/kg. This is half of the license fee during the third round of exports last year.
"Eventhough the price at which licenses to export sugar have declined to Rs 2/kg, exports are still reasonably viable for the industry. The mills are still getting Rs 2000/tonne over the realisation in the domestic market," Abinash Verma, director general, Indian Sugar Mills Association (ISMA).
Sugar mills are most happy with the stocks moving out. Suresh Taware, Managing director, Malegaon SSK, Baratmati said, "The current domestic price is Rs 27/kg while we are getting Rs 28/kg to Rs 28.50/kg for the exported sugar. Exports are helping us in keeping cash flows to make cane payments and also to get rid of the carrying cost of surplus stocks."
As the industry is happy with exports, it has demanded next tranche of exports. "We want the government to give permission for export of next one million tonne export in next ten days," said Mr Verma adding, "We had exported 7 million tonne sugar in 2006-07 and 2007-08 when the international prices were not favourable. This year, exports are viable."
The government has allowed export of one million tonne sugar till now in 2011-12. The country has exported 1.5 million tonne sugar in 2010-11. The last date for applying for release orders has been extended by a month to February 16. Release orders of 5.5. lakh tonne sugar have already been issued. The industry is understood to have already contracted for 2.5 lakh tonne sugar though it has not yet applied for its release orders. It is estimated that about 2.5 lakh tonne sugar has already been shipped out of the country.
The traders are however concerned about falling margins with the appreciation of rupee. An official from an MNC trading company said, "With the rupee appreciating from Rs 53 per dollar to Rs 50 per dollar within 15 days, the export realisations have suffered heavily. With the ongoing talk about a second round of exports, the international buyers have adopted a 'hand to mouth' policy as they know that India will keep exporting. There is sufficient availability of sugar from Thailand, Brazil etc."
However, industry body ISMA emphasised that sugar exports are not to be blamed for lower international sugar prices. "Indian exports have not and will not affect international prices as the international players have already accounted for India exporting 3 million tonne sugar. There are many other factors responsible for lower sugar prices,"said Mr Verma.
Source : economictimes.indiatimes.com