By Thomas Kutty Abraham, Bloomberg
Mumbai: India, the world’s second-biggest sugar producer, may export as much as 2 million metric tons this year, twice the initial forecast, because of incentives proposed by the government to boost shipments amid a record production.
The government will pay exporters up to Rs1,400 ($33) a ton to help meet the transportation costs to the ports, citing farm minister Sharad Pawar. India’s sugar cane-crushing season ends in September.
“The subsidy has made Indian sugar very competitive and we should comfortably export 2 million tons this year,” Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd., India’s third-biggest producer, said in a phone interview. Exports could “easily” reach 3 million tons next year, he said.
An increase in shipments from India may compound a global surplus and lower the chances of a recovery in sugar prices that have slumped 29% in the past year. World output is headed for the first surplus in four years after price gains in 2004 and 2005 led growers in Brazil and Asia to boost plantings.
Lower prices have reduced profits on exports from India and companies have shipped 350,000 tons since the government ended a six-month ban in January, said Murkumbi. The Indian Sugar Mills Association in January had forecast exports of 1 million tons.
Sugar prices in India have fallen by more than a fifth the past year amid forecasts of a bumper crop. Production may reach 24.9 million tons in the year through September, and output may grow by 10% in the 2007-08 cycle, depending on this year’s monsoon, Czarnikow Sugar Ltd. said in a report.
The bumper crop has increased pressure on the government to provide mills incentives to export and support domestic prices. The government will announce subsidies after securing permission from the election commission, said a food ministry official, who didn’t want to be identified, on 26 March.
Indian sugar is available for exports at $315 a ton free on board basis, compared with $320 a ton for Brazilian sugar, said Murkumbi. The country’s proximity to markets in Africa and Asia cuts freight costs and voyage time, he said.
The ruling Congress party faces an assembly election next month in Uttar Pradesh, the nation’s biggest sugar cane-grower that sends a seventh of all lawmakers to federal parliament.