The Hindu Business Line : Sugar industry to utilise export quota to US

WITH domestic prices on a roll, the sugar industry is not particularly enthused over the allocation of 8,000 tonnes of raw sugar for exports to the US under the Preferential Raw Cane Sugar Tariff Rate quota for the fiscal year 2004 (October 1, 2003 to September 30, 2004).

The Director General of Foreign Trade (DGFT) had recently approved the allocation of 8,000 tonnes from the free sale portion of 2003-04 season production (October 1, 2003 to September 30, 2004) and placed the same at the disposal of the Indian Sugar Exim Corporation Ltd (ISECL).

ISECL has been nominated as the sole agency authorised to export raw sugar (from the free sale quota) to the US.

Currently, international raw sugar prices for delivery in May 2004 are ruling at 6.15 cents per pound, which comes to about $135 per tonne free-on-board (f.o.b). On the other hand, the realisation on the 8,000 tonne US raw sugar quota would be much higher at $275-300 per tonne (f.o.b).

In rupee terms, this works out to Rs 12,500-13,500 per tonne. The effective realisation for the mills would be even lower, after making deductions for inland freight, interest and port handling expenses.

On the other hand, mills are realising Rs 14,000-14,250 per tonne on the white sugar they are selling domestically. "Even after making comparisons on a raw sugar-to-raw sugar basis, there is no real advantage to be gained from exporting the raw sugar quota. In fact, left to themselves, the mills would prefer to sell their sugar in the domestic market rather than supply to Indian Sugar Exim Corporation for the 8,000 tonne quota," a miller pointed out.

But at the same time, "we will definitely go ahead with the exports since it is important to us from a long-term point of view", the miller added. He referred to a similar situation in the early 1980s, when domestic prices were ruling way above the realisations to be obtained from exporting to the United Kingdom under the latter's 25,000 tonne annual quota to the State Trading Corporation.

"Since STC did not supply the quantities under the quota, today our annual white sugar quota to the European Union as a whole is only 10,000 tonnes, with the earlier 15,000 tonne quota being now allocated to the ACP (Africa, Caribbean and Pacific) countries. We cannot allow a similar situation to repeat itself with regard to the US", the miller added.

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