Sugar exports under the Merchandise Export from India Scheme (MEIS) reached just 350,000 tonnes by the end of July, or less than 20% of the 2.0 million tonne quota fixed by the government for sale by September 30, according to industry sources

Some consignments are on their way to ports, but the industry is till "completely off the target", Indian Sugar Mills Association (ISMA) director general Abinash Verma said.

As there is a huge difference between the domestic and export price of sugar, the loss to be incurred on each kg of sugar to be exported is around INR10-11 whereas the government’s financial assistance, through the cane price route, works out to around INR7.7/kg. As a result, a large number of mills are not releasing sugar, and exporters, in turn, do not have sufficient quantities available for shipping, he said.

"The current policies do not encourage sugar exports. Domestic prices are artificially up as the government has put a cap on the quantity of sugar that can be sold in the market,” Verma said. While the demand for sugar ahead of the festival season is estimated to be around 2.15-2.2 mln tonnes, the quota fixed by the government for August is about 1.75 mln tonnes. It was 1.65 mln tonnes in June, Verma said.

Domestic prices are currently around INR32 per kg, said Verma. He called on the government to fix the minimum sugar price at INR35-36. “Once this is done, there may not be any need for giving financial incentives for meeting exports requirements. The mills will then be in a position to bear the losses as they can make it up from the domestic market,” the ISMA official said.

According to the latest data released by the government, cane price dues to be paid to the farmers were around INR168 bln until July, the highest ever at this time of year, Verma said.

Extracted from Agribusiness Intelligence