Indonesia May Emerge as the Biggest Importer of Indian Sugar

Indonesia could emerge as the largest importer of raw sugar from India, world’s second-largest sugar producer, and may make up for any drop in exports to Iran, where shippers are facing payment problems. According to Indian Sugar Mills Association (ISMA), Director-General Abinash Varma revealed Indonesia could import 20 lakh tonnes of sugar from India. Currently, the The sugar prices in the world market are increasing at a record high since 2017 that make the opportunity speed up the sugar export.

ISMA’s Varma said India’s chances of exporting sugar to Indonesia are bright since Thailand, which accounts for 80-85 percent of Jakarta’s total sugar imports, is having a second consecutive bad crop year. “It gives India an advantage. Also, Indian sugar is now allowed into Indonesia at preferential import duty like Thailand and Australian sugar, which will help it to make further headway,” said the official of ISMA, the apex body of private sugar mills in India.

“The roles of Indonesia and Iran with regard to India’s sugar exports are set to change with Jakarta likely to import over 10 lakh tonnes against three lakh tonnes last season (October 2019-September 2020),” said MEIR Commodities India Managing Director Rahil Shaikh. Shaikh said that at least 16 lakh tonnes of sugar have been contracted for exports since the Union government announced a Rs 6,000 per tonne subsidy for shipments on December.

Under the incentive scheme, which will cost the Union government Rs 3,500 crore, up to 60 lakh tonnes of sugar can be exported. The Centre announced the incentive to help the sugar mills clear a part of their inventories and pay cane arrears to farmers to the tune of about Rs 13,000 crore for the crop procured last season.

Source: Bloomberg

He said exports had begun well with prices being good for raw sugar. “We are not as competitive as Brazil in the market but compared to other destinations, we are better,” he said. However, India has an opportunity to export a good quantity until March, when the crop from Brazil, the world’s biggest sugar producer, enters the market. Arrivals of its crop ended in September. It could be difficult for India to export white sugar now. We will be able to push raw sugar in view of limitations on ports, movements and containers.

“Sugar for exports was quoting at Rs 26,000 in December and is now Rs 27,000-27,500,” Shaikh said, adding that a major part of the exports was raw sugar. Sugar prices have gained mainly since the US dollar has weakened,” said the MEIR Commodities India managing director.

World’s largest sugar trader Alvean CEO Paulo Roberto de Souza told Bloomberg that the global market will face two years of sugar shortage with production falling short of demand by 50 lakh tonnes this season and 60 lakh tonnes next season.

“Demand for raw sugar is good. Most countries have set up facilities or refineries for raw sugar. If Indonesia becomes the largest importer of Indian sugar, then raw sugar will play a big role,” said ISMA’s Varma. Countries such as Malaysia, Bangladesh and those in the Gulf all have refineries for raw sugar. “However, exports to countries such as Sri Lanka, Afghanistan and East Africa will be in whites,” Varma said.

India needs to export at least 50 lakh tonnes of sugar this season to ensure sugar mills are not burdened with huge carryover stocks. The industry carried over 10.7 million tonnes of sugar stocks from last season to this season. The huge carryover stocks were despite a record 57 lakh tonnes sugar exports.

The carryover stocks are projected to be a high 9.6 million tonnes this season, too, in view of sugar production being high. India’s sugar production has been estimated at 31 million tonnes against 27.42 million tonnes last season. However, some industry sources now peg production lower in view of lower yield in States such as Uttar Pradesh and diversion of cane for the production of khandsari sugar.