China sets sugar import quota at 1.945 million tonnes to meet its country’s sugar needs by 2020. Recently, China had signed a memorandum of understanding with India to purchase 50,000 tonnes of raw sugar. Dhampur Sugar Mills would export the quantity to four refineries in China.
Its domestic sugar industry is struggling to compete with foreign rivals due to higher production costs. Therefore, they urged the country’s Ministry of Commerce to extend to increase tariffs on sugar imports. In a bid to safeguard China’s domestic sugar industry, the country had imposed the tariff on sugar import in the year 2017. Industry bodies in the country claim that some countries are exporting sugar below the cost prices, which has hampered the domestic sugar sector.
Indian sugar mills aim to export around 50,000 tonnes of sugar to China. This follows extensive discussions between high-level trade delegates from China, who had visited India recently. On an average, China imports around 50 lakh tonnes (lt) of sugar annually.
Sanjay Khatal, managing director of Maharashtra State Cooperative Sugar Factories Federation, said this will be the first time that the quota was fixed so early in the season. “Guided by this, mills can take a conscious decision on whether to go for production of export-friendly raw sugar or convert the same into white sugar,” he said.
Given the cost advantage the mills from Uttar Pradesh enjoy in domestic markets, the export quota is expected to be fulfilled mostly by mills in Maharashtra and Karnataka. For the upcoming season, the central government has given a 60 LT quota for exports. Last year, of the 50 LT quota given, mills had reported exports of around 35 LT.
Back in August, the central government had announced a Rs 6,268 crore package as subsidies for pushing exports. The subsidy will be directly paid to the bank accounts of the farmers to help mills clear the mandatory fair and remunerative price (FRP) for sugarcane procured.
Also, given the back-to-back bumper crop the country had reported for the last two seasons, the sugar glut has posed a great challenge before the industry.
Millers said the decision of the government to release the export subsidy after fulfilling 50 per cent of the export quota will help them in accelerating exports. Earlier, mills had to wait for around 30 to 40 days after exports for the government to release their subsidy. Also, most of the subsidies have been de-linked from each other, which millers said will help them in the long run to clear the FRP at the earliest.
India’s export subsidies come at a time when Brazil, the largest producer of sugar, has decided to downgrade its sugar production figures. In lieu of higher oil prices, Brazil is expected to deliver around 35.9 per cent of its total cane towards production of ethanol as against the 35 per cent of the previous season. Mills in India have been pushed towards exports to reduce the glut in the sweetener in the country. It is expected that the country will be starting the season with 142 lt of sugar and, thus, the drought and floods in Maharashtra and Karnataka are not expected to have much effect on sugar prices.
China is the world’s largest importer of sugar in the world, followed by Indonesia. In 2019-20, China is likely to produce 10 million tonnes sugar, while their annual consumption is 15 million tonnes.