Informist, Wednesday, May 29, 2024
By Afra Abubacker
NEW DELHI – Despite ample sugar production in the current season and forecast of above normal monsoon, which bodes well for the upcoming cane crop, the government is unlikely to permit exports of the sweetener this year ending in September. The Centre is likely to prioritise putting ethanol production back on track over sugar exports, industry and government officials said.
According to industry officials, an excess stock of 2-3 mln tn of sugar has already piled up on the back of many restrictive policies. Grim sugar output estimates for 2023-24 of around 29-30 mln tn, released in October by industry bodies, firmed up sugar prices. To ensure sufficient sugar availability in the country, the government had curbed sugar exports, capped sugar diversion to ethanol production, and imposed a 50% export duty on molasses.
"El Nino is now almost gone. And La Nina brings good rain. It will perhaps change the dynamics," said Prakash Naiknavare, the managing director of the National Federation of Cooperative Sugar Factories. "There is a remote possibility of allowing at least 1 mln tn of exports next season in Jan-Mar. Provided rains help us," he added.
"But it's all based on ifs and buts. As of now, exports can only happen in the next season," he added. The major sugarcane-crushing season runs from October to May while Tamil Nadu and Karnataka have an additional crushing window during Jun-Sep.
On the issue of surplus sugar with mills, Indian Sugar & Bio-energy Manufacturers Association President Mandava Prabhakar Rao said, "Mills have completed sugarcane crushing for the season and there is a surplus of 2 mln tn sugar." He added that the excess crystallised sugar is taking up storage and adding carrying costs to mills.
Since April, ISMA has been asking the government to allow sugar exports by September, citing comfortable closing stocks. With an opening stock of 5.6 mln tn and sugar production expected at 32.0 mln tn, the association pegs total sugar availability in 2023-24 at 37.0 mln tn. With consumption demand at 28.5 mln tn, a healthy closing stock of 9.1 mln tn can be anticipated by the end of the season, it said. Around 6 mln tn, or three months of consumption demand, is kept aside as the buffer stock, which leaves India with an excess sugar stock of 3 mln tn.
The request to allow sugar exports is based on a careful balance between meeting domestic consumption needs, sustaining the ethanol blending programme, and leveraging surplus for export opportunities, ISMA added.
In October, the government extended the export ban on sugar indefinitely as concern over lower production gripped the market. The restriction applies to raw sugar, white sugar, refined sugar, and organic sugar. However, India exports sugar to some countries based on the requests of foreign governments. In 2022-23 (Oct-Sep), the country allowed mills to export only 6.2 mln tn, after permitting a record 11.1 mln tn exports in 2021-22.
However, Naiknavare said, "For the government, every surplus sugar this season is saved granule next season. As an industry association, I would like exports to be there, but personally, I don't see that happening."
The India Meteorological Department's forecast of above-normal southwest monsoon rains in Jun-Sep bodes well for sugarcane crop and sweetener production in 2024-25 (Oct-Sep). However, Naiknavare says the government will promote ethanol production over sugar exports. To reduce dependence on crude oil, the government has set a target of achieving 15% blending of ethanol with petrol in 2023-24, and 20% in 2025-26. Ethanol is made from starch-containing feedstocks like molasses and grains.
The new government will first look at where the brakes were applied, Naiknavare said. "The brakes were applied on ethanol, they would like to release the brakes because ethanol is a national policy," he added.
In December, the government capped sugar diversion for ethanol production at 1.7 mln tn amid concern about low sugar production. However, sugar production in the country picked up and as of Apr 15 it was 31.1 mln tn, down merely 0.5% on year. As a result, the government allowed additional sugar diversion for ethanol production, taking it to a little over 2.0 mln tn, from 1.7 mln tn earlier.
On Apr 24, the government allowed sugar mills to produce ethanol from an additional unused 700,000 tn of B-heavy molasses, equivalent to 325,000 tn of sugar, lying in inventory as of Mar 31. On Dec 7, it had asked mills to stop using cane juice and B-heavy molasses to ethanol and rectified alcohol production.
ESTIMATES GONE AWRY
Since the restrictions on sugar diversion for ethanol in December, the sugar industry has been under tremendous stress and confusion, Naiknavare said. Asked why the 2023-24 sugar season saw many restrictions, experts point fingers at unpromising market projections that prompted the government to take pre-emptive measures in an election year. "Information flow and wrong estimates confused the government," ISMA's Rao said. "...but we will not point out whose estimates it was," he added.
In October, ISMA projected 2023-24 gross sugar output before ethanol diversion at 33.7 mln tn, down 9% on year, as patchy rains in Aug-Sep spurred concerns over sugar recovery. The association did not release net sugar output estimates as sugar diversion to ethanol production was unclear.
Meanwhile, the National Federation of Cooperative Sugar Factories estimated net sugar production at 29 mln tn, down 12% on year. The cooperative body pegged sugar diversion to ethanol making at 4.0 mln tn, compared with 4.5 mln tn last year. In 2023-24, the government allowed only 2 mln tn of sugar diversion for ethanol production.
However, as of Apr 30, mills in the country produced 31.4 mln tn sugar. ISMA expects another 500,000-600,000 tn of sugar output from Karnataka and Tamil Nadu in Jun-Sep, taking the total sugar output in the country to 32.0 mln tn this season, it said in a release dated May 6.
Asked why the initial estimates were drastically different, Naiknavare said, "...these numbers came wrong because retreat rains came." Retreat rains in November came in handy in Maharashtra, Karnataka, and Gujarat. "The standing cane got water, tonnage, and sugar content improved," he explained. Retreating monsoon, or northeast monsoon begins with the withdrawal of southwest monsoon from the Indian subcontinent, and it runs from Oct-Dec.
However, experts say estimates are a necessary evil, and stressed that transparency in information flow and timely revision of policies. Some believe projections should be made only in January when the sugarcane crop situation is clear. "Any projections made before January will have a higher error margin," said Praful Vithalani, chairman, All India Sugar Trade Association.
Though the weather vagaries may change the production scenario as the season progresses, ISMA’s Rao said that estimates given in October can be referred for policy decisions, given that policy decisions are also revised likewise. "Disputes are happening about estimates. If the government wants to, they can do parallel estimates," he added. Currently, the government only gives estimates of the sugarcane crop and not that of sugar output.
ISMA will release its 2024-25 sugar output estimates on Aug 1, after its committee meeting on Jul 31. The premier sugar body releases its estimates after satellite mapping, ground checks, and vetting by regional bodies. "Our figures are well debated and vetted by 36 members," ISMA Director General Deepak Ballani, said. End
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