No cap likely on sugar export orders

Sugar exports may be allowed without any restriction on the quantity once an exporter has registered with the Directorate General of Foreign Trade (DGFT).

According to official sources, the issue of quantitative restriction was sorted out at the beginning by the Prime Minister’s Office, when the decision was taken to free sugar exports. However, sugar being an essential commodity, covered under the Essential Commodities Act (ECA), a watch needs to be kept on the overall quantity of export. “Whether to have a release order or the need for an exporter to take prior per permission of the sugar department or ministry of food is keeping the issue unresolved till date,” said a source.

Officials feel the ECA only specifies the government decide whether or not to allow export but not on taking the permission of the ministry (consumer affairs, or MCA, in this case) everytime one exports. The idea is that an exporter will just need to register with the DGFT. Later, he will be required to file a report with the directorate of sugar on the total amount, so that MCA could keep a check on the total amount, sources said.

On March 26, the empowered group of ministers (eGoM) on food had decided to allow a million tonnes of sugar export, but the decision had not been notified in the absence of a decision on export modalities. The government last week had decided to free sugar exports and also scrapped the minimum export price on onion.

For the two million tonnes of sugar exports so far allowed in the 2011-12 marketing year, the food ministry was allocating the quota among millers on the basis of the average production of the last three years. Maharashtra, the country’s largest producing state, had 7.3 million tonnes till March 15, about 13 per cent higher than last year. Production in Uttar Pradesh is also up about 13 per cent to six mt. Karnataka and Tamil Nadu have also reported higher output of 3.2 mt and 1.08 mt, respectively.

Faced with a severe squeeze on margins, sugar mills are reportedly looking at alternatives, largely in potable alcohol and energy. There is a delay in fixing the ethanol price, though oil marketing companies (OMCs) had floated a tender in January-February to procure 1,010 million litres during the current season. The ministry of petroleum has approved Rs 34-35 a litre for ethanol, up from the existing Rs 27 a litre. However, this has not been notified, due to stiff resistance from the ministry of chemicals.

OMCs, thus, have not yet started lifting ethanol. While the industry is demanding an increase of Rs 7 a litre, to Rs 34 a litre for the current season, the ministry of chemicals suggests procuring at the old price of Rs 27. This is because ethanol is used as a basic raw material for many chemical industries. Thus, in a period of economic slowdown, higher ethanol prices might push up costs at a time when many chemical industries are running below capacity to maintain margins, said a market source.