Most sugar refineries find quantity allocation unviable to start refineries

Most sugar refineries barring a few large ones have shut down their production facilities for the current season, nearly 45 days ahead of time, because cane is not available and the government’s raw sugar import policy does not justify continuance of operations.

While the government says it has allocated import quotas evenly among sugar mills through a formula, most refineries find the quantity allocated to them unviable.

A handful of large ones, however, continued their refining operations with a very low operating capacity.

The quantity allocated to most of sugar refineries is sufficient for just 8-12 days of their average monthly installed capacity. Since the resumption of refining in this condition is unviable, most refineries, barring a few, do not see merit in importing raw sugar.

Alternatively, such mills have to forego their shares in allotment and those might go to large players.

“The quantity allocated to small mills is unviable. Hence, probably they would sell their import quotas to large mills with permission from the Directorate General of Foreign Trade (DGFT), the designate authority to monitor the import of raw sugar, or surrender their quantity to the DGFT,” said Sanjiv Babar, managing director, Maharashtra State Federation of Co-operative Sugar Factories.

For importing 500,000 tonnes (0.5 million tonnes) of raw sugar, which the government of India allowed for the current season, the DGFT received requests for 2.79 million tonnes from more than 40 mills. The DGFT says it has devised a formula for allocating the 0.5 million tonnes. Based on this formula, however, Chennaibased ISP Sugar Refinery Pvt Ltd received an allocation of just 370 tonnes against its installed capacity of 900 tonnes a month.

Shree Renuka Sugars (SRS) Ltd, however, received an allocation of 50,000 tonnes for its Haldia plant, which has an installed capacity of 75,000 tonnes.

“We welcome the quick and transparent award of tariff rate quotas (TRQs). Restricting the refining period to 60 days after customs clearance will ensure that refined sugar is available in the festival season,” said Narendra Murkumbi, managing director, SRS.

Trade sources, however, say that a number of players who are not serious about the business have received allocations. “Perhaps they will have to surrender the quantity of allocation,” a source said.

Importing raw sugar was found necessary after a sharp increase in refined sugar prices in India following a slump in local output this year (October 2016September 2017).

While the government says it has allocated import quotas evenly among sugar mills through a formula, most refineries find the quantity allocated to them unviable