Sugar exports from India is a risky bet @ present situation due to international prices are cheaper
Next year’s sugar season is also expected to see a good sugar output, according to early predictions.
The industry, therefore, wants to export a part the excess of 4.5 mn tonnes by the first quarter of fiscal 2019 itself. Exports are usually done by mills in coastal states such as Maharashtra or Tamil Nadu, and not from those in landlocked Uttar Pradesh. The news on the international price front is not good. Raw sugar futures are trading lower by 12% from the start of 2018 and are down by 28.5% over a year ago.
In a conference call after its December quarter results, Balrampur Chini Mills Ltd’s management had said, in response to a question, that a subsidy of Rs10/kg could be needed based to make exports viable. While that’s a financial burden to the government, it may have no choice but to bear it.
The industry has accumulated substantial sugarcane arrears. One can expect the industry and government to agree upon a package of concessions, including export quotas, in return for clearing those arrears at the earliest. But these negotiations can take time.
The sharp fall in sugar mills’ shares reflects the uncertainty that will continue till then. Moreover, India’s revised sugar estimate upsets the global sugar supply balance too. International prices may decline further, which will widen the gap between domestic gaps and what export realisations offer.
Once there is clarity on exports and government support, investors will be able to take a view on the outlook for sugar mills. As of Tuesday, Balrampur Chini’s shares are down by a fifth over end-February, while that of Bajaj Hindusthan Sugar Mills Ltd is down by 12%, and Dhampur Sugar Mills Ltd is down by 15.9%.
