New Delhi, March 15 Sugar imports — both raws and whites even at zero duty — have become unviable in the present scenario where the Centre is going all out to ensure that prices do not cross the Rs 25 a kg level at the retail end in the run-up to elections.
On Friday, the New York No. 11 raw sugar contract for May closed at 12.88 cents a pound.
Since this quote is for 96 degree polarisation (a measure of sucrose content or purity of the sugar) and the raws that are imported from Brazil are of polarisation above 99 per cent, there is a 4.05 per cent ‘pol premium’ payable, taking the price to 13.40 cents a pound or $295 a tonne.
If, to this, one adds freight from Brazil — which is around $40 a tonne now, after ruling as low as $20-25 in December-January — the landed cost comes to $335 or over Rs 17,300 a tonne at the current exchange rates.
Processing costs
A sugar mill in Peninsular India importing these raws would incur port handling and transport charges of about Rs 1,500 and another Rs 2,000 as cost of refining. The ex-factory cost of the processed sugar would, then, be Rs 20,800 a tonne, which is more than the Rs 19,500 being realised by factories in Maharashtra and Rs 20,000 by southern mills.
“The Rs 20,800 rate does not include any margins for the processor. Then, there is the cost of adhering to the monthly release mechanism (which imposes an inventory holding charge on the processed sugar), which adds another Rs 1,000 a tonne,” industry sources said.
In other words, imports are not viable unless the miller is confident of realising at least Rs 22,500-23,000 a tonne after adding all processing costs and a reasonable margin. “This is not possible if the Centre has seemingly set a lakshmanrekha of Rs 25 a kg as the consumer price. And given the prospects of a further weakening of the rupee, besides the obligation to re-export white sugar 36 months after importing the raws against advance licences, nobody would want to import now,” the sources pointed out.
No new contract
So far, importers have apparently contracted 9.3-9.4 lakh tonnes (lt) of raw sugar. These include 5.25 lt by Shree Renuka Sugars, 90,000 tonnes by NCS Sugars, 50,000 tonnes by Dalmia Sugars, 40,000 tonnes each by Simbhaoli, Dharani and Rana Sugars, 25,000 tonnes each by Dhampur Sugar and the EID Parry-Cargill refinery at Kakinada, and 22,000 tonnes by the KK Birla Group.
In addition, Cargill and the public sector PEC Ltd are said to be holding 70,000 tonnes and 8,000 tonnes of raws at bonded warehouses for sale to prospective users. “Since February 20, not a single new contract has been entered into. And even of the contracted quantities, the bulk is yet to physically arrive,” the sources added.
The import equation is still adverse for white sugar, where the London May contract closed at $392.5 a tonne on Friday. If one were to account for the Thai premium of $25 over the London price plus freight cost of $25 (whites are shipped in smaller vessels), the landed cost in India will be well over $440 or almost Rs 23,000 a tonne.
“Even at zero import duty (against the existing 60 per cent), discharge costs of Rs 500 and similar charges on wholesale distribution plus countervailing duty of Rs 850 and sales tax of Rs 1,000 will take the price well beyond the Rs 25,000 lakhshmanrekha,” the sources noted.
Source : Business Line