Mumbai: Indian millers are holding back sugar exports to make the most of a faster gain in domestic prices compared with the export price over the last three weeks, industry officials said.
In Kolhapur, a hub for the sugar trade in the western state of Maharashtra, ex-mill prices of premium quality (M-grade) sugar rose nearly 10% to 1,312 rupees per 100 kg over the last three weeks. In other trading centres, prices have risen by the same margin.
In comparison, the gain in export prices in Maharashtra, the biggest sugar-producing state, was nearly half that of the domestic market at 5.3%. Prices rose to 1,000 rupees per 100 kg on 24 January, from 950 rupees three weeks ago.
“Things have changed. The jump in the spot price has prompted sugar factories to raise export prices. They are rethinking at what price they should export,” said Balasaheb Patil, president of Maharashtra Cooperative Sugar Factories Federation (MCSFF).
India may produce 26 million tonnes of sugar in the year to September 2008, nearly 12% less than earlier forecasts, due to a delay in crushing, the farm minister said last week.
“In last 15 days there has not been a new deal on the exports front. Export deals were struck in December, but after the production outlook was reduced, the industry is now in a wait and see mode,” said T.R. Shah, a sugar trader in Chennai, Tamil Nadu.
The country aims to export 3 million tonnes of sugar in the crop year to September 2008, from 1.7 million tonnes a year ago. India, the world’s number two sugar exporter, has shipped 354,000 tonnes in first three months of the year begining October.
However, factories have to calculate many things, including stocks, storing expenses, interest and export subsidies before they sell in the domestic market, said Vinay Kumar, director general, National Federation of Cooperative Sugar Factories.
Industry officials said exporting the maximum possible quantity was in the interest of the sector in the long run.
“Export is a good option. By exporting you are saving interest and getting rid of excess sugar and since there is no quantitative restriction you can export as much (as you want),” said Prakash Naiknavare, managing director, MCSFF.
“In contrast, in the domestic market one is bound by the release mechanism and can not sell more than the quota released by the government.”
Sugar trading in India is controlled by the government, which sets a monthly quota millers can sell without price restrictions.