India Business

Low International Sugar Prices Force Millers To Cut Down On Exports

Written By Akriti Tyagi | Mumbai | Published:

Hack:

  • International sugar prices are at a low, preventing healthy exports despite government subsidies
  • The government approved incentives worth Rs 6,268 for sugar exports
  • The millers would much rather convert their old stock into ethanol

Current international sugar prices are at an 11-month low, which is going to take a toll on the exports. Sugar exports will be low as the millers in India would much rather convert their old stock into ethanol, which is seeming to be a more viable option for them.

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Government Subsidies

The Cabinet Committee of Economic Affairs (CCEA) had approved incentives worth Rs 6,268 crore last month to subsidise exports of as much as 60 lt of sugar in 2019-20. The millers were to be given Rs 10,448 per tonne of sugar exported in lieu of handling, marketing, packaging, and other costs. 

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Regardless of the government subsidy, the millers aren't too keen to export with such low sugar prices. At prevailing international rates, white sugar will have to be exported out at Rs 21 per kg, which means ex-mill realisation of Rs 19.50. Even with the Rs 10/kg subsidy of the government, the realisation of Rs 29.50 is lesser than the present Rs 32-32.40 per kg price. The ‘raw’ sugar, has taken a hit as well and is retailing at Rs 18 per kg in the international market. Exporting the product with sugar prices so low isn't viable for them.

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Bombay Sugar Merchants Association's take

Mukesh Kuvadia, Secretary of the Bombay Sugar Merchants Association, said that the government's plan to export 60 lt of sugar in the current year will take a step back as the millers are not willing to export their produce with such low prices.

“Since India announced its decision to export 60 lt of sugar, international prices have dovetailed. At present rates, most millers would rather hold on to their new stock or convert old stock into ethanol rather than sending it to export markets,” he said.

Last year as well, the government had planned for India to export 50 lt of sugar. However, only 38 lt of sugar could be exported by the millers.

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Ethanol as a viable option

M D Joshi, managing director of the Kolhapur-based Jawahar Shetkari Cooperative Sugar Mill, said the stock which is lying unsold for the last 2-3 years would be converted to ethanol.

“This would allow mills to generate ready cash and also liquidate their old stock,” he said.

For the first time in the country, mills will be allowed to manufacture ethanol directly from sugar and cane juice. The millers would much rather prefer this route, as opposed to exporting, since the ethanol will be procured by oil companies at Rs 59.48 per litre. With the prevailing international sugar prices, the millers are preferring to use their old sugar stock in this manner. 

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