March 1: Nearly 5,000 tonnes of sugar from Pakistan have landed at Indian ports, confirming the sugar industry's fears about a further downward pressure on prices. Pakistani sugar was last imported in 1994, when private traders brought in around 20 lakh tonnes.Pakistan has recently become an exporter of sugar and the government has already cleared three lakh tonnes for export, according to industry sources. For the Pakistani industry, exports to India are lucrative as it is the only country that does not impose any duty on sugar imports. Even Pakistan levies a 26 per cent duty on sugar imports. In addition, nearly three lakh tonnes of imported sugar (mostly from Brazil and Thailand) have arrived in the domestic market till date. Brazilian sugar, according to industry sources, commands a discount of $10 to $15 a tonne.
For Indian importers, there is a margin of at least Rs 1.50 to Rs 2 per kg in importing from Pakistan. If more sugar comes from Pakistan, as is anticipated by industry, realisations fordomestic mill owners are likely to plummet further.
Taking advantage of the zero import duty, "several multinational sugar trading houses have established outfits in India and are responsible for the bulk of such exports," says an Indian Sugar Mills Association (ISMA) note to the food ministry. Some of these firms are ED&F Man, Glencore, Louis Dreyfus and Cargill. Industry calculations show that the gains on imported sugar as on January 24, 1998, work out to Rs 136 per quintal, with a wholesale price of Rs 1,445 in Mumbai. The gain is even higher, at Rs 193, when compared to the Calcutta wholesale price of Rs 1,502 a quintal. The current price scenario for free-sale sugar shows that the mills are barely able to recover their costs as the ex-factory price of free-sale sugar has dipped sharply from levels in the first week of December 1997.
The free-sale price of sugar, in fact, dipped from Rs 1,350 per quintal on December 6, 1997, to Rs 1,300 on January 24, 1998. Industry calculations show that thebreak-even cost for ex-factory free-sale sugar is Rs 1,365, which means that at current prices the mills are losing Rs 65 per quintal. Industry estimates suggest that by the end of the 1997-98 season, there will be a surplus of at least 25 lakh tonnes of sugar.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
