PUNE: With the global trends in sugar prices being subdued, the Government’s announcement of 2 million MT of sugar exports under the Minimum Indicative Export Quota (MIEQ) scheme in March 2018 is yet to commence fully. Subsequent announcement of production subsidy of Rs 55/MT announced in May 2018 too has not resulted in raising sugar exports. As per an ICRA note, the oversupply scenario therefore continues to prevail in the domestic market, resulting in sugar prices touching a low of Rs. 27,500MT in mid May 2018.
Sabyasachi Majumdar, Senior Vice President & Group Head, ICRA Ratings, “Domestic sugar production for SY2018 is set to cross 31 million MT from 20.3 million MT in the previous year. This has been driven principally by a recovery in production in Maharashtra, North Karnataka and Uttar Pradesh (UP). We expect domestic sugar consumption to increase to around 25.0 million MT in SY2018 from 24.5 million MT in SY2017. As per our estimates, even after meeting the target of exporting 2 million MT, the domestic market would still have around 2.5 – 3.0 million MT of excess sugar stocks than the normative stock for the next season.
Hence, while the sugar prices are likely to improve with the successful implementation of MIEQ, any significant increase from the current levels can be ruled out, given the continued oversupply scenario in the domestic market.”
In March 2018, the Food and Consumer affairs (FCA) Ministry has allowed for sugar exports of 2 million MT under the Minimum Indicative Export Quota (MIEQ) scheme during SY2018. Under this scheme the export quota has been fixed, taking into account the average production of mills achieved in the last two years and up to February of this marketing year.
Subsequently in May 2018, the Government of India (GoI) has notified a cane production subsidy of Rs. 55/MT, which would be paid directly to farmers as part of the cane costs. Sugar mills meeting 100% of the target notified under the MIEQ are eligible for this subsidy. “However, the exports are yet to pick up in a full-fledged manner due to low global sugar prices. The sugar surplus in the domestic market has resulted in a significant decline in the sugar prices and has curtailed the mills’ ability to clear the cane payments and the cane arrears crossed Rs. 20,000 crores during the current season. Given the increase in production levels and fall in prices, government support will be critical for improvement in the financial performance of the sugar industry in the near term,” Majumdar added.