It would make immense commercial sense to undertake sugar exports in the coming months and derive the benefit of high international prices.
With cane acreage and output rebounding in the 2010-11 season, prospects of a big expansion in sugar production are bright. The latest estimate of sugar production stands at 25 million tonnes for the new season that has just commenced compared with last year's 18.5 mt. No wonder, the Minister for Food and Agriculture is keen to lift the embargo on sugar exports as soon as the festival season ends, which also coincides with the beginning of the crushing season. As luck would have it, the global sugar market favours producers, with prices hitting a 30-year high on the bourses. In addition to strong fundamentals that support high sugar prices, further quantitative easing in the US and the prospect of continued low interest rate regime have been supportive. Globally, sugar prices are expected to stay at elevated levels until the demand-supply fundamentals turn more consumer-friendly.
Today, the world desperately needs Indian sugar to fill-in the supply shortfall and moderate prices, unlike on many previous occasions when sugar merely added to the already sizeable global supplies. It would make immense commercial sense for India to undertake sugar exports in the coming months and derive the benefit of high international prices, something it never could do in the past. It may also make sense to enter into forward contracts (at lower prices) for imports some time in the second half of next year, should the situation warrant. Together with an estimated opening stock of about 4 million t, the total sugar availability during the following months is likely to be at least 5 mt in excess of the consumption requirement estimated at about 24 mt. In addition to meeting extant export obligation (estimated at about 800,000 tonnes), export of about two million tonnes is unlikely to unduly squeeze domestic availability. However, it is important to take a call on exports without delay. Simultaneously, the industry should be forced to clear cane arrears so that growers stay committed to retaining the acreage at about 5 million hectare for the next season. Meanwhile, it is critical that the controversy surrounding the ethanol blending programme is brought to an end soon. While the industry is reported to have committed for supplies of about 600 million litres of ethanol, a committee under the Planning Commission has suggested that the quantum be pruned to 400-500 million litres for the current year. It is unclear if the expert panel enjoys the mandate to stipulate quantity, in addition to fixing prices. Mills apprehend that the balance quantity may have to be marketed to industrial users at steeply lower prices. The stand-off threatens a delay in cane crushing in Uttar Pradesh.
All these indicate how muddled the thinking within the government is. Sugarcane is now perceived not only as food but also as fuel. With so much happening in the sugar sector, the talk of decontrol seems to have evaporated into thin air. It is necessary for the policymakers, growers' representatives, industrial consumers and mills to look at the sugar sector holistically and come up with positions that advance growth and equity.
No comments:
Post a Comment