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Sugar mills worry over surplus, talk of 'industry collapse'
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SME Times News Bureau | 15 Oct, 2018
With the availability of sugar set to reach an unprecedented level of 44
million tonnes thanks to huge unconsumed stock from last year and
expected higher production this year, an imminent threat of "industry
collapse" is being talked about. This has pushed mills to consider
producing globally-accepted high-quality refined sugar as the most
promising way to dispose off the surplus.
The decision of Brazil,
the world's largest sugar producer, to lower production this year has
given Indian industry an opportunity to fill the space. However, it will
have to live up to global expectations, the National Federation of
Cooperative Sugar Factories (NFCSF) has said.
It said the mills
are planning to boost their exports by improving quality of sugar to 45
ICUMSA grade, a high quality refined grade and considered one of the
highest purity levels globally.
"Currently, we produce sugar
whose grade is between 100-150 ICUMSA. Till now, the domestic
consumption offset the domestic output. So Indian sugar mills never
bothered about producing high refined quality sugar as per the global
standards," NFCSF Managing Director Prakash Naiknavare told IANS.
ICUMSA
is a global body and its rating is an international unit for expressing
the purity of the sugar, which is directly related to the colour of the
sweetener.
Brazil has decided to cut down sugar production by
earmarking more cane for manufacturing ethanol, so India finds a space
where the domestic surplus can be accommodated.
"To achieve it,
we will have to produce sugar of 45 ICUMSA grade. It will take minimal
efforts and capital to upgrade the existing machinery," Naiknavare said.
India
has a surplus (opening stock) of 10.5 million tonnes from the last
season and it is expected to produce around 33.5 million tonnes of the
sweetener in 2018-19 starting October.
So the total availability
of sugar this year will be around 44 million tonnes against the expected
domestic consumption of 26 million tonnes, thus putting a "burden" on
the mills to clear huge sugar stocks in the backdrop of depressed retail
prices -- around Rs 37 per kg in the national capital compared to
around Rs 40-43 a year ago.
As the sugar output in Brazil is to
go down by almost 10 million tonnes, India is set to become the largest
sugar producer in the world this year.
Naiknavare said it was "a
god-sent" gift, which had provided India "with an opportunity to make
perception that India can be a great destination" for high-quality
refined sugar.
As per the initial estimates of the Indian Sugar
Mills Association (ISMA), which represents private sugar mills in the
country, India is set to produce around 35 million tonnes in the 2018-19
season starting October against 32.25 million tonnes in the previous
year.
The NFCSF, however, said that the 2018-19 production
figures would be around 33.5 million tonnes owing to the infection of
white grub in Maharashtra and Karnataka, which damages roots leading to
the death of cane.
The government can store three million tonnes.
It will also help mills to export five million tonnes under the Minimum
Indicative Export Quota (MIEQ) by compensating expenses towards
internal transport, freight handling and other charges.
"The
government's assistance and incentives have been helpful to the
industry. Even if we take all these into account, including 26 million
tonnes of domestic consumption, there will be surplus of 10 million
tonnes. If it is not disposed, the industry will collapse," said
Naiknavare, adding all stakeholders, including the ISMA, had started
brainstorming on how to dispose the surplus.
The government,
while announcing a bail-out package for the industry in June this year,
had fixed minimum selling price (MSP) at the mill gate of Rs 2,900 per
tonnes to ensure that retail prices do not fall further.
The average price sugar received at global market in last 15 days is roughly Rs 2,200- 2,400 per tonne.
However,
the prices have been on the increase from last few days -- 10.97 cents
per pound on September 28 to 13.11 cents per pound on October 9
according to the International Sugar Organisation -- a trend the Indian
sugar industry finds positive.
Acting on the industry's request,
the central government had given a subsidy of Rs 55 per tonne of
sugarcane to help mills to clear cane farmers' arrears.
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