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Informist, Tuesday, Jul 16, 2024

 

--Sources: Nearly 500,000 tn sugar smuggled out of India since Oct

--CONTEXT: Govt has banned sugar exports on concern over lower output

--Sources: Sugar being smuggled out of India to Bangladesh, Nepal

--Source: Sugar smuggling was high in Feb-Apr, has tapered now

--Sources: Sugar smuggling out of India in yr to Sep seen 700,000 tn

 

By Afra Abubacker 

 

NEW DELHI – Despite the government's strict ban on exports, around 400,000-500,000 tn of sugar has been smuggled out of India so far in the sugar season that started in October, industry sources said. Most of it has been smuggled to Bangladesh and Nepal, they added.

 

"In February-April (sugar) leakage was high. But in the past two months, it has come down," a Kolkata-based sugar exporter, requesting anonymity told Informist. "Borders are tight now and sugar leakage is only negligible," he added.

According to the sources, sugar is being smuggled out through the northeast, especially Assam and Tripura, to Bangladesh, and from Bihar to Nepal. Most of the sugar has been smuggled out from Guwahati to Bangladesh using railway wagons, they added. Railways carry bulk commodities like coal, cement, petroleum products, and essential commodities like sugar, salt, oils, and others through wagons.

In October, the government extended the export ban on sugar indefinitely until further orders as concern over lower production gripped the market. The export curbs were first imposed in June 2022, and later extended till October 2023. However, India has allowed export of sugar on the requests of some countries. 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.

 

In September, the government allowed 25,000 tn of sugar to be exported to Nepal and Bhutan each under a government-to-government agreement through National Cooperative Exports Ltd. The quota is valid till September 2024. Bangladesh had requested India for 100,000 tn sugar in January, but India is yet to allocate quota for the country.

"International sugar prices are high and import duty in Bangladesh is high, therefore they prefer the illegal flow of Indian sugar," the exporter said.

Despite ample sugar stocks in the country, government officials have made it clear that they have no plans to open the domestic market for exports till Sep 30, which is when the ongoing sugar season ends. The government is keen on saving surplus sugar for the next season and putting ethanol production back on track 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 (Apr-Mar), and 20% in 2025-26. However, industry experts expect India to miss the 15% blending target for this year, as the government has restricted sugar diversion for ethanol production due to concerns over sugar availability.

 

The country is expected to achieve only 13.7% ethanol blending with petrol by October, according to Nagaraj Meda, chairman and managing director of commodity research firm TransGraph Consulting.

 

"About 700,000 tn sugar could spill to neighbouring countries by September," a major Mumbai-based sugar exporter said. However, the Kolkata-based exporter said the figure of 700,000 tn is unlikely to be reached since smuggling has tapered down in the last two months as border checks have tightened.

 

Though the industry sees a slim chance of the government allowing sugar exports by September, they hope the Centre will revisit its policy in January, when the production scenario for 2024-25 is clearer. However, since April, the Indian Sugar and Bio-energy Manufacturers Association has been urging the government to allow at least 1-2 mln tn exports by September, citing comfortable a stock position. 

 

With an opening stock of 5.6 mln tn and 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, ISMA said. Around 5.5 mln tn, or three months of consumption demand, is kept aside as the buffer stock, which leaves India with an excess sugar stock of 3.6 mln tn, it added. 

 

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. However, the government has turned a deaf ear to ISMA's cry for exports. 

 

"The demand (for exports) is right, but the timing is wrong," Prakash Naiknavare, managing director, National Federation of Cooperative Sugar Factories, said at a recent sugar conference in Khandala, a hill station near Mumbai. He said the industry needs to be patient and appropriately time policy advocacy. The right time to press for exports is after August, he said.

 

ISMA's letter urging the government to allow exports has boosted sentiment in the market, as mills are sitting on surplus sugar stocks, which has increased their carrying costs and posed liquidity challenges.  End

 

Edited by Ashish Shirke

 

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