Should India Export At The Risk

of
Fuelling SUGAR Prices At Home..?

“Group E”
Rachna Arora
Raksha Kashyap
Robin Thomas
Rohin Khanna 1
 Agenda
• Sugar Industry “An Overview”
• Current Scenario - Domestic
- International
• Price Trends “Effect and Importance”
• Key Challenges
• Outlook

2
 Sugar Industry “An Overview”
• India – largest consumer, second largest
producer.
• 2nd largest agro industry after cotton.
• Annual Turnover – Rs. 150 bn
• 525+ operating sugar mills.
• 45 million sugarcane farmers, workers,
labourers etc.
• Sugarcane producing States U.P,
Maharashtra, Karnataka, Tamil Nadu etc.
3
4
 Sugarcane Production
• Requires Tropical Climate.

• Requires plenty of water.

• Sugarcane Season – Cultivation starts in

June.

• Crushing Season – Starts from October.

5
 Government Regulation on Sugar
#1
Sugarcane procurement

• Concept of Command Area which binds Cane farmers and

Sugar mills to sell and buy from each.

• Sugar mills have to purchase all the Cane sold to them, even if
it exceeds their requirement.

• In case of capacity expansions at existing Sugar mills, there is

uncertainty regarding allocation of additional Area based on
the expanded capacity.

6
 Government Regulation on Sugar
#2
Sugarcane pricing
• Government administered Statutory Minimum
Price (SMP) which acts as a floor.

• States like UP, Haryana and Punjab fix a higher

price for cane, called the State Advised Price
(SAP). . Historically, the SAP has been as high
as 20-30% above SMP.

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 Government Regulation on Sugar
#3
Sugar sales
• Government mandates 10% of sugar to be
sold as levy quota sugar at prices much
lower than the market.

• The government also specifies monthly

release quotas for free sale sugar.

8
 Government Regulation on Sugar
#4
Capacity and Production
• Sugar producers are not allowed to own
cane fields in India.

• New sugar mills cannot be set up within

15 km of existing units.

9
 Government Regulation on Sugar
#5
Exports & Imports
• Imports of both raw and white sugar attract a
basic duty of 60% and a countervailing duty of
Rs. 910 per ton.

• In periods of sugar shortage, under the

Advanced License Scheme (ALS), license
holders can import raw sugar without paying any
duty, subject to the condition that they re-export
white sugar within a fixed period.

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Sugar Cane Production India

Increasing trend in cultivation and production of sugarcane

340,000 5,000

'000 Hectares
4,800
320,000
'000 Tons

4,600
300,000 4,400
4,200
280,000
4,000
260,000 3,800
2,008 2,009 2,010

Area Harvested '000 Hectares RHS Production in '000 MT LHS

Source: USDA India Report 2010

Cane for Sugar – 65% of total cane production.
Sugar extraction rate 10-12%.
Sugarcane production for 2010 – 325 Million Tons
11
Crop – 48 Lakh Hectares
 Sugar Production India
Rising Sugar Production
30

25
Million Tons

20

15

10

0
2007-08 2008-09 2009-10 2010-11

Sugar Production in MTs

Source: Ministry of Agriculture.

12
Domestic Sugar Price Movement
Price Trend of Sugar over the Years

4500
4000

3500
Prices Per 100kg

3000

2500

2000

1500

1000

500

0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2008 2009 2010

Source: ncdex 13
 Recent Scenario
• Estimated Sugar Production for current
season starting from Oct 1, 2010 – 27.5
MT (Estimated - MoA)

• Domestic Demand – Around 25.5 MT

• Surplus – 2.5 MT

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 Sugar – Bitter or Sweet?
• Weight in WPI – Sugar MSP per Quintal
3.4%
150

• Since September

Rupees
100

2010 – 1.7% 50

0
2005- 2006- 2007- 2008- 2009- 2010-
• Political Outlook 06 07 08 09 10 11

Sugar MSP per Quintal

• From Farmers Source: Ministry of Agriculture.
Viewpoint

15
 Sugar Exports and Imports
In terms of value
Export-Import Trend show Inverse Relation

700,000.00
600,000.00
500,000.00
Lakh Rupees

400,000.00
300,000.00
200,000.00
100,000.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Import of Sugar in Lakh Rupees Export of Sugar in Lakh Rupees

Source: Ministry of Commerce

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 Imports and Exports
in terms of quantity
Falling Imports Trend of Exports before 2009-10

5 7
6
4
5
Million Tonss

Million Tons
3 4

2 3
2
1
1
0 0
2008-09 2009-10 2010-11 2006-07 2007-08 2008-09

Imports in Million Tons Exports in million tons

Source: The Hindu Businessline

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 Major Sugar Producers
(Projected 2010-11)
World Wide Sugar Production

39.4

25.7
Million Tons

12.7

7.6 6.9
5.5

Brazil India C hina US Thailand Mexico

Source: USDA 2010 Report

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 Global Scenario

  2009/10 2008/09
  (In MT)
Production 157.16 152.482
Consumption 166.585 164.153
Surplus / Deficit -9.425 -11.671
Source: ISMA

World Sugar Production 2010-11– 168.8 MT

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 World Sugar Prices
Trend of World Futures Sugar Prices

35000 800

30000 700

600
25000
500
In Rupees

In USD
20000
400
15000
300
10000
200

5000 100

0 0
12.11.10* 12.11.10* 12.11.10* 12.11.10* 12.11.10*

DEC '10 MAR'11 MAY'11 AUG'11 OCT'11

One contract for 1 metric ton Source: ISMA

Rs. $

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 Key Challenges

• Increasing sugar production – reducing

inefficiencies, likely consolidation in
industry.
• Increase in cane production – incentives to
farmers – switching to other crops.
• Limitation in cane production – Yield,
Climate.
• Adding capacities – new refineries.
21
 Outlook
• Sugar Closing Balances – 5.5MT (Current year)
(Sufficient for single quarter consumption in India)

• Group of minister to decide on Sugar Exports, awaiting

revised estimates

• Government to decide in favour of sugar exports if

estimates show an excess production over domestic
demand

• Sugar Exports can be in the range if 2 to 2.5 Million Tons

if allowed at all

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Thank You

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