Sugar cos call for export incentives to support surplus

Sugar industry foresees a surplus production for the next year. It is mulling to export some volumes to balance the surplus and seize the opportunity of high international prices that has come up post the fire at the port of copper sugar — the largest exporter of Brazil. Abinash Verma, director general of ISMA (Indian Sugar Mills Association) sees this as an opportunity to push out three million tonne of surplus sugar.

ISMA has also requested the government for support as the international market is not completely viable for exports. M Manickam, MD of Sakthi Sugars echoed Verma’s thoughts. He says sugar surplus must be sold via exports for which government incentive is a must.  He remains concerned with the current sugar price hovering below the breakeven price of Rs 35 plus per kg and advises creation of a buffer of five million tonne. Also read: UP sugar crisis: Govt mulls linking cane with sugar prices Below is the edited transcript of his interview to CNBC-TV18. Q: What are the key highlights of this season? Did the year pan out in line with your expectations? What is your forecast for the next year? Verma: We are expecting another surplus sugar production next year. We are moving into the next year with a surplus sugar production. We will be trying to export about 3 million tonnes into the international market to actually take care of this surplus. The international market about four-five days back was not really viable for us to export. Recently, we heard there was fire in the Brazilian terminal at the port of the Copper Sugar which is the largest exporter of Brazil. There is going to be delay in the exports from Brazil and therefore we have seen a spurt in the international prices. It gives us an opportunity to push us or contract for a good amount of sugar exports from the country. Q: Have you heard anything from the government on incremental exports? What is the inventory buildup looking like right now? Verma: We have opened the new sugar season that is 2013-14 as on October 1, 2013. We have an opening balance of about 8.8 million tonnes and next year we expect about another 1.5 million tonnes of surplus. Therefore, we will be touching about 10 million tonnes of surplus in the next season. We are actually trying to export three million tonnes. We have not heard anything from the government as far as any incentives for the exports is concerned. We have requested for some support because the international market is unviable for export. We are not going to wait for very long. The industry has decided to push out some sugar even if that means some losses for us. We will push out about 3 million tonnes with the help of some exporting houses. Q: What are you expecting in terms of sugar price movement and realizations? Manickam: Right now, if you look at the Futures market for India, the prices are not looking very encouraging. We need to export about three million tonnes, but I would also like the government to create a buffer for at least another 5 million. We always have a variation in the sugar market and they should try to support the prices. The breakeven price for sugar mills is above Rs 35 per kg and we are still around Rs 29-30 per kg. Unless, both these happen that we export something and a buffer is created, we may not have these prices. The government has to step forward and support the industry by allowing exports and giving some subsidy on it, and plus creating a buffer. Q: How much have the international prices of sugar gone up and can they sustain at these levels? Manickam: It has gone up by about 1-1.5 cents and it is a temporary blip. We have a good window that we can use. It is not going to be a major opportunity for us to capitalize for the long-term.