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Informist, Friday, Mar. 21, 2025

 

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--Deccan Sugar's Jain: Agree with ISMA view of 26.4 mln tn output in 2024-25
--CONTEXT:Deccan Sugar Executive Director Vinod Jain's comments in interview
--Deccan Sugar's Jain: Enough stock for export of 1 mln tn sugar in 2024-25
--Deccan Sugar's Jain: Expect carryover stock of 5.4 mln tn for next season
--Deccan Sugar's Jain: Industry exported around 110,000 tn sugar February
--Deccan Sugar's Jain: Industry exported around 200,000 tn sugar March
--Deccan Sugar's Jain: Mills exporting sugar at a premium to domestic rates
--Deccan Sugar's Jain: Mills exporting good quality sugar at $562.50 per tn
--Deccan Sugar's Jain: Buyers willing to pay only $520/tn for quality sugar
--Deccan Sugar's Jain: Exports helping millers with cane payments to farmers
--Deccan Sugar's Jain:Production cost of INR 41 per kg more than market rate
--Deccan Sugar's Jain: Sugar for ethanol diversion this yr around 3.5 mln tn
--Deccan Sugar's Jain: See prices over INR 41-INR 43 per kg in long term

By Taniva Singha Roy and Anjali Lavania

 

MUMBAI – Even as India's sugar production in the current season ending September is expected to drop to 26.4 million tonnes from 31.9 million tonnes a year ago, Deccan Sugar Mills Pvt. Ltd. Executive Director Vinod Kumar Jain says the industry will meet the export quota of 1 million tonnes sanctioned by the government, largely on account of ample carryover stocks.

 

India had banned sugar exports in June 2022 to regulate amid concerns about inflation and potential shortages. However, the government partially lifted the ban on Jan. 20, allowing mills to export 1 million tonnes in 2024-25 (Oct-Sept) with an aim to support sugar mills and stabilise domestic prices. The move has made it easier for mills to make cane payments to farmers, Jain tells Informist in a video interview. 

 

According to Jain, around 110,000 tonnes of sugar were exported in February, and another 200,000 tonnes in March.

 

Jain says that prices across the country are in the range of INR 3,700-INR 4,000 per 100 kg. However, as the production cost of around INR 41 per kg is higher, not many mills find their operations profitable, he says.

 

At INR 31 per kg, the minimum selling price of sugar hasn't been hiked since 2019, while the fair and remunerative price has been increased thrice since then, Jain says, calling for an increase in the minimum selling price to ensure mills don't record losses.

 

The Yavatmal-based Deccan Sugar was established in 1997, initially as Sagar Wine Manufacturing & Marketing Pvt Ltd. It is involved in manufacturing raw sugar, white sugar, rectified spirit, absolute alcohol, and a few other products.

 

Following are edited excerpts from the interview with Jain:

 

Q. Various sugar associations have cut their estimates for sugar output in the season ending September. What is your estimate and will it be sufficient for the export quota of 1 million tonnes set by the government?

A. I go on the basis of the estimate given by the India Sugar Mills and Bioenergy Manufacturers Association, which is 26.4 million tonnes for this year. Yes, it will be sufficient for export of 1 million tonnes and there will be no crunch in availability.

 

With the opening stock of 8.0 million tonnes and net sugar production after diversion for ethanol at 26.4 million tonnes, the total availability of sugar for the 2024-25 (Oct-Sept) sugar season is 34.4 million tonnes. We have domestic consumption of 28.0 million tonnes, which can be easily met after exporting 1 million tonnes, and a balance of 5.4 million tonnes will be left as carryforward stocks next year.

 

Q. Sugar prices have been rising for the last few months. The India Meteorological Department has forecast higher temperatures in the summer months, which may push up demand for the sweetener. In your view, how high can prices go?

A. Prices have not gone up much and the recent slight increase in price is due to seasonal demand. There was festival demand before Holi, so prices increased slightly. Then, due to the summer, there was demand from ice-cream and cold-drink manufacturers. But again, due to Ramadan, prices were at lower levels. There will be good demand again during Diwali, but by that time, new production will be available around October, so prices will not increase much.

 

It was at INR 3,300-3,400 per 100 kg a few years back, and now it is around INR 3,700-3,800 per 100 kg in Maharashtra and INR 3,900-4,000 per 100 kg in the northern belt. The current prices are not enough for sugar mills to progress, as the cost of producing 1 kg of sugar is around INR 41 per kg. To keep up with the production cost, prices will have to be the range of INR 3,900-4,000 per 100 kg.  

 

Q. The government has allowed export of 1 million tonnes of sugar. Acoording to you, how much has already been exported? Do you see any hurdles in meeting the export quota?

A. According to data collected from customs authorities and agencies, around 110,000 tonnes of sugar was exported in February and 200,000 tonnes in March. We have sufficient stock along with the carryforward of 8 million tonnes for export of the sanctioned quantity of 1 million tonnes, and there will be no ban on exports any soon.

 

Q. How competitive is Indian sugar in the export market? Mills are charging a premium for export over domestic rates. Could this impact our export performance?

A. Sugar factories are demanding around INR 44,000 per tonne and then there is an additional logistic freight-on-board expense. So, it is not a priority for global buyers and, hence, it is moving out of the country at a slower pace. Higher prices are impacting export demand, but we have time to export till September.

 

Mills are asking for around $562.50 per tonne for good quality sugar, but buyers are willing to pay only $520 per tonne for it.

 

Q. Are sugar mills comfortable with the minimum selling price? As sugar prices are rising and exports are allowed, has the position on cane payments improved?

A. The sugar industry is not very comfortable, and we are asking the government to revise the minimum selling price, as it has been the same since 2019. In 2019, they kept the sugar minimum selling price at INR 31 per kg. But on the other hand, the fair and remunerative price of sugarcane has been increased thrice ever since. Hence, the industry is not in a comfortable position and needs a hike in the minimum selling price. If the government increases the minimum selling price to INR 41 per kg from the current INR 31 per kg, mills will be able to cope with the production cost. Otherwise, we are stuck in the same place. However, due to exports, the position of mills in terms of cane payment to farmers has definitely improved and about 80?ne payments for the current sugar season have been made so far.

 

Q.What is keeping sugar prices steady?

A. Prices are not increasing because of demand. Now, festivals like Holi have gone, and Ramadan is on. During Ramadan, prices have been between INR 36 and INR 38 per kg and also at INR 39 per kg in some places. Now, the summer season will also start. For the summer, we have sufficient sugar and it can be used. Demand for soft drinks increase during the summer and so does demand for the sweetener. But I don't think there will be much impact on sugar prices this time.

 

Q. Is the monthly sale quota of 2.30 million tonnes for March sufficient to meet demand?

A. Yes, the sugar sales quota is sufficient for to meet the demand, and it will not increase. I don't think the government will revise the sale quota for this month as all major festivals are over and there are only a few days left for the month to end.

 

Q. Given the current demand, do you think that India needs to import sugar?

A. No, there is no requirement for imports. International sugar prices are more than domestic prices. If we consider importing refined sugar, it costs around $560 per tonne. Also, the total cost of imports including freight and other charges will be much higher than the domestic price. Second, if we are importing raw sugar, by the time the imported raw sugar arrives, all sugar factories will close. If we process raw sugar to white, sugar factories will have to restart, which will be a difficult task and will require a lot of modifications. So, chances of sugar imports are negligible. 

 

(Sugar crushing in India typically starts from mid-October and mills continue operating till the end of March or the first week of April.)

 

Q. How much sugar will be diverted towards ethanol this year? Is such diversion profitable for sugar mills?

A. Sugar diverted to ethanol this year will be around 3.5 million tonnes. Most sugar factories are facing problems because of prices. Sugar factories produce ethanol from three types of sugar based feed-stocks, which are sugar syrup, B-heavy molasses, and C-molasses. Yes, selling ethanol is profitable for millers.

 

(For ethanol supply year 2024-25 (Nov-Oct), the government has fixed the procurement price of ethanol from sugarcane syrup at INR 65.61 per litre, while for B-heavy molasses it is INR 60.73 per litre, and for C-heavy molasses it is INR 57.97 per litre)

 

Q. Where do you see sugar prices in the long term?

A. According to me, sugar prices should be more than INR 41-INR 43 per kg. However, traders and consumers are becoming very smart and that's why they don't pay this much because of the availability of alternatives such as jaggery. Moreover, the government has put the minimum selling price for sugar at INR 31 per kg. Hence, prices are not increasing much and are still at INR 37-INR 39 per kg.  End

 

Edited by Avishek Dutta

 

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