Located in South Asia, India is the biggest producer of sugar in the world and ranks second behind Brazil when it comes to sugar exports. The country is known for supplying high volumes of fine-quality sugar to different parts of the world, and thus sugar millers, sugar suppliers, and sugar exporters of the country enjoy a high demand for their commodity all-round the year.
Riding on the back of strong demand, sugar exporters of the country, exported record volumes of the sweetener in May this year and thus for the first time in six years, the government of India with a view to ensure domestic availability and price stability in the domestic markets, moved sugar from “free” to “restricted” category. With this, the sugar export quota for the current sugar season was set at 10 mt which the government subsequently raised to 11 mt.
With the improving sugar situation, the sugar millers had faith that the government would again bring back sugar in the “free to trade” category and with this belief, sugar mills in Maharashtra and Karnataka began signing deals with trade houses for the export of 2 million tonnes of sugar from November 2022-February 2023. However, the government’s decision to extend the sugar export quota and allow Sugar Exporters to export the sweetener up to 6mt till May 2023 came as a surprise for them.
Owing to GOI’s decision, Indian sugar started fetching attractive prices in the global market and as a result sugar mills of the country that signed deals prior to the government’s decision started canceling or re-negotiating deals.
Finding themselves in a fix, trade houses started purchasing sugar from the mills in Uttar Pradesh, Punjab, Bihar and Jharkhand and as a result, sugar mills from these states traded around 5 lakh tonnes of their export quota and that too at a premium rate.
Reasons Behind Such Exports From These States
The GOI on 5th of November 2022 resumed sugar exports and allowed the sugar exporters of the country to export up to 6 mt of sugar till May 2023. With this the demand for Indian sugar went up in the global market and as a result the commodity started fetching attractive rates.
Owing to this, sugar millers of Maharashtra and Karnataka who already signed deals with trade houses for supply of 2 mt of sugar began canceling and re-negotiating deals to ensure that they avail high prices for their sugar deals. As trade houses buy sugar in bulk directly from mills and supply it to overseas buyers, they were caught in a fix. In contrast to sugar mills, trade houses can’t renegotiate or default deals as they are reputable entities and to avoid huge losses, they started procuring sugar from states of Uttar Pradesh, Punjab, Bihar and Jharkhand at premium rates.
Rise In Sugar Exports Despite High Transportation Costs
Owing to these, mills located in northern states like Uttar Pradesh, Punjab, Bihar, Jharkhand have traded approximately 5 lakh tonnes of their export quota and that too at a premium rate.
This is of high significance as unlike coastal states, these states don’t have ports in their vicinity to carry out exports. Further, high transportation cost also acts as a barrier if they wish to export through other ports and thus the states exporting such volumes despite the obstacles is surely commendable.
As soon as the GOI announced its sugar export policy for the 2022-23 sugar season, the global prices of sugar have firmed up. As a result, the sugar millers of Maharashtra and Karnataka who signed deals with trade houses prior to the order began canceling and re-negotiating deals. To avoid losses, trade houses started procuring sugar from northern parts of the country and as a result, states like Uttar Pradesh, Punjab, Bihar, and Jharkhand traded 5 lakh tonnes of their export quota and at premium rates.
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