Indian sugar companies losing appeal as global commodity prices plummet
01-Feb-2007 •Value Research
The recent decision of the government to lift the ban on sugar exports may bring limited gains for the industry. This is due to the fact that world over the price of the commodity is falling. Consequently, Indian sugar is losing its competitiveness in the international market.
The ban, which was imposed on July 4 last year to check inflation, was partially lifted on December 18, 2006. Under this decision, exports were partially open to companies under the advance licence scheme. Exports from the county may already add to the slump in global prices.
India's sugar output is expected to touch 23 lakh tonnes this year, of which around 11 lakh tonnes may be exported. This may strengthen domestic prices to some extent.
Subsequent to the lifting of the ban on exports and the fall in prices internationally, the players had been seeking concessions in the form of transport and ocean subsidy. Some experts say that India lost its market share during the ban period to Brazil and Thailand, which exported 6 million tonnes to Bangladesh and Sri Lanka. Brazil is expected to have a bumper production this year, which may further dent prices. However, the silver lining for the sugar companies seems to be the government's recent announcement of making the blending of 10 per cent ethanol with petrol compulsory.
Earlier, the 5 per cent ethanol doping programme could not take off since the sugar industry had been seeking higher price for selling ethanol to oil companies. Ethanol is made from molasses, a key by-product of sugarcane processing. Ethanol is also used for manufacturing medicine, garments, paints etc. India is among the major global players competing with Brazil, Thailand, Australia and Cuba.