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India announces 2 mil mt sugar export quota to bolster domestic prices

https://www.chemnet.com   Apr 02,2018 Platts
India's Ministry of Consumer Affairs, Food and Public Distribution Wednesday announced a Minimum Indicative Export Quota or MIEQ of 2 million mt of sugar until the end of the 2017-18 (October-September) season to facilitate the cash flows of mills and bolster domestic prices.

The domestic price on the NCDEX in Kolhapur, Maharashtra had fallen 16.4% to $469/mt Wednesday from $561/mt on October 3, 2017, the start of the 2017-18 season. The NCDEX Kolhapur sugar price firmed $4.50/mt Wednesday on the back of the MIEQ announcement.

Domestic sugar prices in India have been falling due to the bumper crop expected this season.

India has had a stunning V-shaped recovery from being a net importer while producing 20.3 million mttq last season to being a net exporter this season with a production estimate of 30.2 million mttq, S&P Global Platts Analytics data showed.

In line with the MIEQ, each mill has to comply with the mandatory export duty. Failure to do so would be considered a breach of government directives under clause 5 of the Sugar (Control) Order, 1966. However, the quotas are tradable among sugar factories on mutually agreeable terms and conditions.

The Indian government has allowed the export of white sugar until the end of the current season (September 2018) under the Duty Free Import Authorization scheme, under which exporters can import sugar at zero import duty for the subsequent three seasons.

EXPORT DUTY SCRAPPED

These policy announcements were on the back of India scrapping a 20% export duty on raw and refined sugar last week. Domestic prices in India still remain fairly strong compared with the world market at this stage, even after the removal of the export duty.

"At the current price level in India, domestic mills would be losing around $150/mt on exports," a trader said.

More government intervention would be required to make exports viable, market sources said. However, it remains to be seen whether the government will resort to an export subsidy to deal with the domestic surplus.

The last time India exported sugar was in 2015-16, when the government awarded a production subsidy of Rupees 45/mt (70 US cents/mt) of cane crushed on the condition the industry exported about 3.2 million mt of sugar and supplied a fixed volume of ethanol for blending, Platts Analytics data showed.

After this, the industry managed to export 1.6 million mt in the 2015-16 season; production during 2015-16 dropped to 25 million mttq against a record crop of 28.3 million mttq during 2014-15, Platts Analytics data showed.

The policy announcement of 2 million mt of exports from India this season has tightened the bear grip in the international market. The front-month May London No.5 refined sugar future prices fell $8.10/mt day on day Wednesday to settle at $347.80/mt.

Increased production and exports from India is part of a wider trend of record production in Thailand and strong exports from the EU and Pakistan.

Thai sugar cash premiums for refined sugar in breakbulk have dropped from around $20/mt at the start of the season to $6/mt Thursday, Platts data showed.
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