Indonesia is Being ‘Golden Opportunity’ for Global Sugar Exporter
Indonesia requires at least 35 lakh tonne of raw sugar this season to meet rising household consumption which could throw up new opportunities and create a possible export market for Indian sugar mills that is having enormous sugar stocks in domestic country
A window for possible export of raw sugar to Indonesia is likely to open for Indian sugar millers. For the first time, Indonesia is likely to tweak its quality norms to enable import of Indian raw sugar, senior industry people revealed. Indonesia imports sugar which has International Commission for Uniform Methods of Sugar Analysis (ICUMSA) level of 1,200 or more. They import only raw sugar, which typically has very high ICUMSA levels, and even the finest quality of Indian raw sugar does not meet its import norms. Sources believe this level will be relaxed to 500-600 ICUMSA. A formal announcement is expected soon.
Indonesia mostly imports sugar from Thailand which has high ICUMSA level. However, Thailand has had a drought this year and has not been able to meet its own domestic requirements and the Brazilian season is yet to commence which leaves India as the only possible supplier.
According to Prakash Naiknavare, MD, National Federation of Cooperative Sugar Factories Federation (NFCSFF), last year the Indian government had sent a delegation led by Joint Secretary, Sugar, Government of India along with industry representatives to encourage sugar exports and Indonesia had then shown a positive response.
“Export contracts have to be signed quickly for mills in Maharashtra and Karnataka to produce raw sugar before crushing ends in about a month,” said Abinash Verma, director general of Indian Sugar Mills Association. “A quick reallocation of export quotas to mills in northern India will help them increase production of raw sugar before crushing ends there in May.”
The delegation had met government officials, Indonesian refiners and local sugar associations and had put forth two demands — reduce the duties from 15% to 5% and relaxing the ICUMSA norms for Indian sugar. Indian white refined sugar, considered the best world over, has ICUMSA level of 45, the low quality white sugar has 150-200, and raw sugar has ICUMSA level of 600-1,000. Naiknavare said that Indian sugar comes under the category of VVHP ( Very Very Highly Polarised) which is to the advantage of refiners since this produces better quality sugar which fetches better prices.
Indonesia annually imports 35-45 lakh tonne sugar and is the second-largest importer of sugar after China. Thailand is usually the main supplier of sugar to Indonesia which is currently facing shortage of sugar resulting in high domestic prices. This has put pressure on the government to import sugar which could be advantageous for our country, Naiknavare said.
Although the Indian season is tapering off, there are still 400 mills in operation throughout the country. In Maharashtra and Karnataka, the sugar season is nearing closure but for mills in Uttar Pradesh, Punjab and Haryana, the season is likely to extend till mid-May, he pointed out. Of the 60 lakh tonne of MAEQs issued by the government, around 35 lakh tonne have already been contracted which leaves another 25 lakh tonne of exports, he said.
Naiknavare said this could be a golden opportunity for Indian millers since there is no other country in global market with sugar in hand and India could become the largest sugar exporter this year if it plays its cards right. When the season began in October, the initial realisation for export of raw sugar was Rs 21,000 per tonne against the minimum selling price of Rs 31,000 per tonne in the domestic market.
However, exporters are now realising a price of Rs 24,000 per tonne, and can claim a government subsidy of Rs 10,480 per tonne. This means mills in Maharashtra are realising Rs 31-32 per kg in domestic sales and Rs 34 a kg on average for exports, including the subsidy. “Switching to raw sugar could improve liquidity of sugar mills and therefore I appeal to all sugar mills to take advantage of this opportunity,” he said.
To switch to raw sugar, millers need to keep their mills shut for a day and clean up the machinery. One has to realise that the Brazilian season will commence from April and the country is expected to produce 320 lakh tonne of sugar and this time they have diverted to cane which is likely to bring down international prices. The Australian season is also commencing from April and this time India is in a position to take advantage, he added.
The nation, which vies with Brazil as the top producer, may sell 250,000 tons of raw sugar to Indonesia by the end of the local crushing period in May after a change in quality rules by the Southeast Asian country. Indonesia may buy 300,000 tons from India this year.
