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Indian mills are receiving around Rs25,000 per tonne for sugar sold domestically. Photo: Bloomberg
Indian mills are receiving around Rs25,000 per tonne for sugar sold domestically. Photo: Bloomberg

Indian mills seen exporting sugar but struggling to meet target

India has been pushing mills to sell sugar on the international market and use the proceeds to clear huge debts they owe farmers for sugarcane

London/Mumbai: Indian mills have contracted exports of almost 100,000 tonnes of home-grown white sugar, but will likely struggle to meet an ambitious government target, traders said.

India has been pushing mills to sell sugar on the international market and use the proceeds to clear huge debts they owe farmers for sugarcane.

The world’s number two producer announced new rules last month making it compulsory for sugar producers to increase exports to at least 4 million tonnes in the present crushing season to reduce stockpiles.

Indian raw sugar export subsidies for the current crushing season are not expected to be approved before state elections finish next month, and mills are focused instead on exporting white sugar to raise cash to finance the coming crush.

Producing at a loss, Indian sugar mills have contracted to export 90,000 tonnes of white sugar to Asian countries such as Myanmar, Afghanistan and Sri Lanka at $390-410 a tonne FOB, for October-November shipment, as mills require cash for the new crushing season from 1 October, people familiar with the matter said.

“Traders have been finalising contracts around $400. There is good demand at this level from Afghanistan and Myanmar," said a Mumbai-based trader with a global trading firm.

“Mills need money to start the new season. They are willing to compromise on prices."

Most mills are likely to start crushing operations in November.

India started the new season with carryover stocks of 9.6 million tonnes, up from 7.5 million last year, the Indian Sugar Mills Association estimates.

Indian mills are receiving around 25,000 ($385) per tonne for sugar sold domestically, about the same as they would receive from exports, traders said.

Robin Shaw, sugar analyst with Marex Spectron, said he did not expect to see a big flow of Indian white sugar exports as the price incentives were not sufficient for mills.

“I think that the Indian government is switching from the idea of forcing exports by mandate, and also from the idea of subsidising exports, to the idea of some kind of voluntary system whereby mills are encouraged to export," he said.

Shaw said mills could be offered soft loans to pay off cane arrears.

“So I think exports will take some time to arrange and will be limited in volume."

Claudiu Covrig, senior agriculture analyst at Platts, said he saw limited prospects for mills to export sugar.

“They won’t respect this target with no further subsidies," he said. Reuters

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