Sugar mills worry over surplus, talk of 'industry collapse'
With the availability of sugar set to reach an unprecedented level of 44 million tonnes thanks to huge unconsumed stock from last year and expected higher production this year, an imminent threat of "industry collapse" is being talked about.
With the availability of sugar set to reach an unprecedented level of 44 million tonnes thanks to huge unconsumed stock from last year and expected higher production this year, an imminent threat of "industry collapse" is being talked about. This has pushed mills to consider producing globally-accepted high-quality refined sugar as the most promising way to dispose off the surplus.
The decision of Brazil, the world`s largest sugar producer, to lower production this year has given Indian industry an opportunity to fill the space. However, it will have to live up to global expectations, the National Federation of Cooperative Sugar Factories (NFCSF) has said.
It said the mills are planning to boost their exports by improving quality of sugar to 45 ICUMSA grade, a high quality refined grade and considered one of the highest purity levels globally.
"Currently, we produce sugar whose grade is between 100-150 ICUMSA. Till now, the domestic consumption offset the domestic output. So Indian sugar mills never bothered about producing high refined quality sugar as per the global standards," NFCSF Managing Director Prakash Naiknavare told IANS.
ICUMSA is a global body and its rating is an international unit for expressing the purity of the sugar, which is directly related to the colour of the sweetener. Brazil has decided to cut down sugar production by earmarking more cane for manufacturing ethanol, so India finds a space where the domestic surplus can be accommodated.
"To achieve it, we will have to produce sugar of 45 ICUMSA grade. It will take minimal efforts and capital to upgrade the existing machinery," Naiknavare said. India has a surplus (opening stock) of 10.5 million tonnes from the last season and it is expected to produce around 33.5 million tonnes of the sweetener in 2018-19 starting October.
So the total availability of sugar this year will be around 44 million tonnes against the expected domestic consumption of 26 million tonnes, thus putting a "burden" on the mills to clear huge sugar stocks in the backdrop of depressed retail prices -- around Rs 37 per kg in the national capital compared to around Rs 40-43 a year ago.
As the sugar output in Brazil is to go down by almost 10 million tonnes, India is set to become the largest sugar producer in the world this year. Naiknavare said it was "a god-sent" gift, which had provided India "with an opportunity to make perception that India can be a great destination" for high-quality refined sugar.
As per the initial estimates of the Indian Sugar Mills Association (ISMA), which represents private sugar mills in the country, India is set to produce around 35 million tonnes in the 2018-19 season starting October against 32.25 million tonnes in the previous year.
The NFCSF, however, said that the 2018-19 production figures would be around 33.5 million tonnes owing to the infection of white grub in Maharashtra and Karnataka, which damages roots leading to the death of cane.
The government can store three million tonnes. It will also help mills to export five million tonnes under the Minimum Indicative Export Quota (MIEQ) by compensating expenses towards internal transport, freight handling and other charges.
"The government`s assistance and incentives have been helpful to the industry. Even if we take all these into account, including 26 million tonnes of domestic consumption, there will be surplus of 10 million tonnes. If it is not disposed, the industry will collapse," said Naiknavare, adding all stakeholders, including the ISMA, had started brainstorming on how to dispose the surplus.
The government, while announcing a bail-out package for the industry in June this year, had fixed minimum selling price (MSP) at the mill gate of Rs 2,900 per tonnes to ensure that retail prices do not fall further. The average price sugar received at global market in last 15 days is roughly Rs 2,200- 2,400 per tonne.
However, the prices have been on the increase from last few days -- 10.97 cents per pound on September 28 to 13.11 cents per pound on October 9 according to the International Sugar Organisation -- a trend the Indian sugar industry finds positive.
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Acting on the industry`s request, the central government had given a subsidy of Rs 55 per tonne of sugarcane to help mills to clear cane farmers` arrears.