Financial Chronicle - - PLAN, POLICY - RA­JEN­DRA JAD­HAV

IN­DIA’S sugar ex­ports are likely to be far lower than a 5 mil­lion­tonne tar­get set by New Delhi as a strength­en­ing ru­pee and fall­ing global prices make ship­ments unattrac­tive de­spite a govern­ment push for over­seas sales, in­dus­try of­fi­cials said.

Lower ship­ments from the world’s No. 2 sugar pro­ducer could sup­port global prices that fell more than 20 per cent in 2018, but fewer ex­ports could also in­crease In­dian stock­piles ahead of the next mar­ket­ing sea­son and force the govern­ment to pro­vide more sup­port to an ail­ing in­dus­try.

In­dia is likely to ex­port 2.5 mil­lion to 3.5 mil­lion tonnes of sugar in the 2018/19 mar­ket­ing year that started on Oct. 1, five deal­ers and three in­dus­try of­fi­cials told Reuters.

“Mills are not ready to sign new con­tracts as the dif­fer­ence in lo­cal and over­seas prices widened,” said a Mum­bai-based dealer with a global trad­ing com­pany that ex­ports the sweet­ener out of In­dia.

“Go­ing by the cur­rent trend, it seems In­dia could man­age to ex­port 2.5 mil­lion tonnes,” he said.

Sugar is be­ing sold at around Rs 29,200 ($414) per tonne in In­dia, while ex­porters are get­ting less than Rs 19,000 a tonne, deal­ers said.

Also, the ru­pee has risen 5.5 per cent from a record low of 74.48 against the US dol­lar in Oc­to­ber, dent­ing mills’ mar­gins from over­seas sales.

That will make it hard to meet the 2018/19 tar­get set in Septem­ber de­spite govern­ment in­cen­tives such as trans­port sub­si­dies and di­rect cane pay­ments to farm­ers to en­cour­age cash-strapped mills to ship sur­plus sugar over­seas.

Ex­ports could pick up in com­ing months, though, as mills are strug­gling to make cane pay­ments to farm­ers, said Ro­hit Pawar, pres­i­dent of In­dian Sugar Mills As­so­ci­a­tion (ISMA).

“I hope we could ex­port more than 3.5 mil­lion tonnes, and for that, millers have to come for­ward more ag­gres­sively and the govern­ment should pro­vide bridge fund­ing,” Pawar said.

In­dian mills have con­tracted to ex­port 1.4 mil­lion tonnes of sugar since the start of the mar­ket­ing sea­son on Oct.1, ship­ping around 650,000 tonnes so far, four deal­ers said.

Ear­lier banks were not al­low­ing mills in Ma­ha­rash­tra to sell sugar at prices lower than those agreed in loan con­tracts made us­ing the stock­piles for col­lat­eral, said Prakash Naik­navare, man­ag­ing di­rec­tor of Na­tional Fed­er­a­tion of Co­op­er­a­tive Sugar Fac­to­ries Ltd, a sugar pro­ces­sor trade group.

But the govern­ment has in­ter­vened to let sales go for­ward. To make cane pay­ments to farm­ers im­me­di­ately af­ter crush­ing, mills pledge sugar stocks with banks, which lend based on sugar prices in the lo­cal mar­ket.

Af­ter pro­duc­ing a record 32.5 mil­lion tonnes in 2017/18, In­dia is likely to pro­duce 31.5 mil­lion tonnes to 32 mil­lion tonnes of the sweet­ener in 2018/19, more than lo­cal de­mand of around 26 mil­lion tonnes.

But In­dia has been strug­gling to ex­port its sur­plus be­cause of high pro­duc­tion costs.

New Delhi asked mills to ex­port 2 mil­lion tonnes of sugar in 2017/18, but they man­aged to ship just 620,000 tonnes.

“Stocks in In­dia are huge. Ex­ports need to be done,” said Pawar of ISMA.

The coun­try started 2018/19 with open­ing stocks of 10.7 mil­lion tonnes, and the in­ven­tory at the be­gin­ning of the next sea­son will be big­ger, Pawar said.

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