India to export raw sugar after 3 years

The sugar industry in India clearly recognizes the potential for business opportunities abroad. This is apparent because of the Indian sugar mills’ decision to export raw sugar for the first time in three years.

India ranks as the second largest sugar producer in the world with an output of 341,200 MT, Brazil topping the list with 7,39,300 MT. Increase in Indian exports is likely to weigh on global prices and cut down the market share of Brazil and Thailand, two major rival sugar suppliers.

Global sugar prices have stretched to seven-month highs. The hike in international prices of raw sugar in conjunction with the steady and rapid depreciation of the rupee has stimulated opportunities for export. Government subsidies have further rendered exports more sustainable. In the last month alone, India gave a green signal for incentives that offer transport subsidy for export. Additionally, farmers will be compensated by means of a direct cane payment with a view to encourage cash-strapped mills to export excess sugar during 2018-2019.

Initially, Indian mills produced white sugar solely for local consumption and were hesitant to sign export contacts as global sugar prices were much lower than local sugar prices. However, the recent surge in international sugar prices and surplus sugar production for two years in a row has compelled Indian mills to venture overseas. The covenants of the export contract state that Indian sugar mills will supply 1,50,000 tonnes of raw sugar on a free-on-board (FOB) basis. The supply will be shipped in November-December and sold for a price of around US$280 per tonne.

As of March 2018, India has decided to export 2 million tonnes of sugar and has stipulated an obligatory export quota for every sugar mill. Contrarily, Indian mills managed to export merely 450,000 tonnes of sugar during the marketing year 2017-2018 which ended on September 30. The industry's failure to meet the target of 2 million was attributed to uncompetitive prices prevalent during the period. However, an important official of the Indian Sugar Mills Association (ISMA) has proclaimed that the mills will attempt to meet an export target of 5 million tonnes in the present year.

Dealers have notified that apart from raw sugar, the mills have contracted to export 100,000 tonnes of white sugar at a price of around US$305 per tonne. The target market for the same comprises of the Middle East and African countries.

In an estimate shared by ISMA, it was stated that India could embark on the new season with inventories of over 10 million tonnes of sugar, while producing another 35 million tonnes in the new season which started on October 1, 2018.