Movement of sugar for domestic and export markets affected by logistical barriers
The movement of sugar shipments within the country, for domestic and export markets, has been affected due to logistics issues, mainly to secure the necessary rail rakes, stakeholders said.
“The movement of sugar by rail from Maharashtra and Karnataka has been disrupted. This is for domestic markets as well as for export. Truck transport is also a problem, ”said Prafaul Vithalani, president of the All India Sugar Traders Association (AISTA).
On Thursday, the Center recognized the problem of transporting sugar across the country and allowed factories to sell the sugar quota for December until January 31, 2022.
Rail rake shortage
“Now considering that some mills / traders are facing logistical issues to lift the quota allocated in December 2021 and in order to facilitate the shipment of the remaining unsold amount of the December quota… It was decided to extend by one month the deadline for the monthly sugar sales quota for December 2021, ie until October 31, 2022 ”, indicated the Ministry of Consumption, Food and Public Distribution in its decree.
“The problem is transporting sugar from factories in Karnataka and Maharashtra due to the shortage of rail rakes. But things are improving, ”said Ravi Gupta, chairman of the AISTA export committee.
Read also The sugar factories have until the end of January to sell their December sales quota
“The government’s priority is to get food grains through the railways. There are similar issues in Raipur, Chhattisgarh, ”said Vidya Sagar VR, director of Bulk Logix.
“Previously, sweets could reserve half a rake, but after the start of the Covid pandemic, they have to reserve a full rake,” said AT Mohan of Chennai-based brokerage firm MAT and Sons.
AISTA’s Vithalani said the problem arose as 38 lakh tonnes (lt) of sugar had to be transported to ports within two months of the start of the sugar season from October 1. but the problem is with the infrastructure, especially when there is a demand to transport such a large amount in a short period of time, ”he said.
Mohan said one of the reasons for the current problem is the financial crisis in the transportation sector following the Covid pandemic. “At least 10 percent of the trucks have been seized by banks for non-payment of contributions. This has resulted in increased truck freight rates, ”he said.
Bulk Logix’s Sagar said there were other issues around the allocation of rail rakes as well. “There are restrictions on the allocation of rail rakes. You now need permission from the district collectors for the allocation of the rakes, ”he said.
“We didn’t expect the problem for the railroads, although we thought we might face some problems on the road. But there is an additional problem with shipping sugar for the domestic market, ”said AISTA’s Vithalani.
Sugar can be sent by rail thanks to the Tatkal system, where the transport can be done within a short time. “While Tatkal’s fees are lower for exports, they are higher for the domestic market. As a result, the northeastern sugar supply has been affected, ”Vithalani said.
Read also Sugar exporters adopt a policy of “waiting and vigilance” while world prices fall
This is why the Center has extended the deadline for shipping the sales quota from December until the end of next month.
On the other hand, with the large movement of sugar from the Indian subcontinent, there is container congestion, especially in the Gulf. “But shipments to Colombo (Sri Lanka) flow freely,” Sagar said.
Sri Lanka buys a fair amount of white sugar from India and for a time discouraged imports as it faced currency crises. Now he has started to loosen up the borders, which has resulted in an increase in Indian sugar.
Offers for 40 lakh tons
“But exports of white sugar to Afghanistan continue to be affected due to the political unrest there, but some containers have reached that country,” said the director of Logix.
A good volume continues to go to Djibouti, from where the sugar is transported to other African countries like Ethiopia.
Sugar sector players are currently facing transport problems as agreements have been signed to export at least 40 tonnes lakh within two months of the start of the season (October 2021-September 2022). At the same time last year, very few agreements were signed as the sugar industry eagerly awaited government export assistance.
No sops this season
Aid to the tune of over 3,500 crore was announced on December 16 last year. This meant that exporters would receive 6,000 yen for every tonne of sugar shipped out of the country. During the 2019-2020 season, the Center provided aid of over 6,500 crore which helped shippers obtain an average of 9,750 yen per tonne to export sugar.
This year, exporters did not ask the Center for any help as sugar prices on the world market soared due to low production and supply problems. With the production of the main Brazilian producer being affected by the weather conditions, importing countries have turned to India to fill the void.
Currently, raw sugar futures for March delivery are listed at 18.79 US cents per pound (₹ 31,000) per tonne. White sugar futures in London for February delivery stand at $ 494.70 per tonne (36,725). Prices are above the highs of over 20 cents per pound for raw sugar and $ 500 per tonne for white sugar, respectively, seen earlier this year.
Indian sugar factories and exporters, which had signed a slew of deals even before the season started, are waiting for raw sugar prices to exceed 19.5 cents before signing new deals.
Indian sugar exports are strong with an estimated production of 30.5 million tonnes against 31 million tonnes last season, in addition to a carryover stock of 10.74 million tonnes from last season.
Last season India shipped a record 71 lakh tonnes of sugar and this season it is estimated to be around 60 lakh tonnes. “Although exporters and factories have set exports at around 60 lakh tonnes, we expect shipments to exceed 90 lakh tonnes,” said Mohan of MAT and Sons.