Sugar industry united on exports, divided on mode

NEW DELHI: Differences within the sugar industry are now split wide open. Alarmed at the worsening price situation, some mills have suggested exports should only be through a single desk. But others in Maharashtra are resisting this move. The food ministry has met the various factions, but has yet to make up its mind. The one thing everyone agrees on is that India urgently needs to export raw instead of ready-to-eat refined sugar.

The different points of view are in reaction to a deepening liquidity and profit crunch being faced by the industry. While it costs Rs 13.50 to produce a kg of sugar, it is being sold for only Rs 11.50. Mills in Tamil Nadu and Maharashtra are directly affected by the export policy because access to ports allows them to enter the world market. On the other hand, UP mills are affected indirectly as a decline in local stocks will lead to a rise in prices.

There are currently three points of view on how India ought to tackle its 10 million-tonne mountain of extra sugar. According to some mills in Tamil Nadu, exports should be canalised through Isgiec, a trading company owned by the sugar industry, and public sector STC. Another faction believes allowing only Isgiec to export sugar from India would solve the industry’s crisis. A third group believes that all mills should continue to export individually, with no curbs on signing contracts.

“Some mills want canalisation because it can be a good thing if two organisations are able to negotiate better prices in the world market. As long as mills won’t have to stand in queue and sugar gets pushed out, it can be a good thing. But others believe that if it is canalised, mills will have to collectively bear the additional losses from exports. Both views have merit,’’ said Rajshree Sugars CMD Rajshree Pathy.

Mills in Maharashtra, however, are clear that canalisation would hit their bottom lines. “Canalisation is a regressive move. We would be going back to that era when all profits were notional but the losses were borne by every one. After having got rid of canalisation through Isgiec, there is no reason why we should go back to that system. We don’t need any handholding,’’ said the MD of a Mumbai-based sugar company.

But there is virtual unanimity within the industry that mills should be allowed to export raw sugar instead of only refined white sugar. There is a healthy demand for raw sugar in south east Asia and the Middle East, where companies are setting up sugar refineries.