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M.R. Subramani

Chennai , Aug 1

A MOVE by Pakistan to allow sugar imports from India after a gap of four years is likely to result in exports of 3-4 four lakh tonnes of the commodity to the neighbouring country.

A Reuters report, quoting a Pakistani official, said the ban would be lifted soon and most probably during an Economic Co-ordination meet in Islamabad on Tuesday. Also significant would be Pakistan's decision to allow imports by road through the Wagah border.

When contacted, the Indian Sugar Mills Association Director-General, Mr S.L. Jain, told Business Line that there was "no reason not to disbelieve" the development. "It is a win-win situation for India and Pakistan. By opening the Wagah border, buyers in Karachi will gain $25 (Rs 1,075) a tonne," he said.

Also, Indian exporters will be able to send sugar by road to Karachi in three days as against 10-12 days for shipping it from either the west or east coast.

"It will also help Indian mills which have an obligation to export white sugar against import of raw sugar," Mr Jain said.

Currently, mills in the country have an obligation to export 15 lakh tonnes of white sugar. "We believe that Pakistan will buy 3-4 lakh tonnes of sugar from India," Mr Jain said.

Industry sources said mills in the North, particularly Uttar Pradesh, could stand to gain.

Asked about the prices at which white sugar could be delivered to Pakistan, the sources said it could be between $360 and $370 for delivery in Karachi.

Mr Jain said the last sale for sugar to Pakistan was finalised at $366 a tonne.

"The world market is firm and nothing can be cheaper than that," he said.

On Monday, white sugar on LIFFE for October delivery ruled at $284 (Rs 12,325) a tonne, down $2.40 from the weekend price on sales. But spot prices f.o.b. European ports are quoting around $327 (Rs 14,175) a tonne. In the domestic market, sugar medium was quoted at Rs 1,990-2,020 a quintal, while sugar small ruled at Rs 1,922/1,950 on the news of export hopes.

Across the border, sugar is currently quoted at Pakistani Rs 30 (Indian Rs 22) a kg.

According to industry sources, Pakistan had no other alternative but to look towards India for its sugar needs. Prices were rising and with Ramzan approaching, it had to act fast, they said.

"India is the only source of quick supply. All other sources of supply have been ruled out," they said.

Last month, it bought one lakh tonnes from the UAE-based Al Khaleej, the only refinery nearby in the region. "Thailand has run dry and therefore, India is the only country which can meet its current needs," they said.

Pakistan had banned sugar imports from India as it was seen hurting its sugarcane growers and mills. Even last week, the apex State Bank of Pakistan said letters of credit could be opened for imports from any country but India.

However, with time running out, Islamabad had been forced a rethink, the sources said, adding that mills in Uttar Pradesh would stand to gain from this.

Sugar prices in Pakistan have been ruling high on projections of a lower crop that was hit by rains. Pakistan's sugar production is expected to decline to around 30 lakh tonnes from 40 lakh tonnes last year. Pakistan's consumption is estimated at a little over 35 lakh tonnes.

In India, too, sugar production during the current crop year ending September is likely to be around 130 lakh tonnes from 175 lakh tonnes last season. For the next season, the production is expected to recover but recent damages to sugarcane crop in Maharashtra and Gujarat could lead to a change in the situation.

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