The Hindu Business Line : Mills bet on raw sugar exports of 10 lakh tonnes

Advantage India
The per tonne freight costs from Brazil to West Asia are $60-62, against $30-32 from India.
The raw sugar, to be delivered from December to February, will be shipped out from Mundra and Mumbai.

New Delhi June 9 Indian sugar companies hope to export at least 10 lakh tonnes (lt) of raw sugar during the coming 2007-08 season (October-September), taking advantage of the substantial new refining capacities created in the West Asia and neighbouring South-East Asian regions.

This follows the Indian Sugar Exim Corporation (ISEC) recently contracting 2.5 lt of raw sugar exports to Al Khaleej Sugar's Dubai refinery at $270 per tonne free-on-board (fob). The raw sugar, to be delivered from December to February, will be shipped out from Mundra and Mumbai. Of the 2.5 lt, ISEC would be sourcing 50,000 tonnes each from Shree Renuka Sugars and Godavari Sugar Mills in Karnataka, with the rest mainly from Maharashtra mills.

Huge Scope

"This is our first real breakthrough in bulk raw sugar exports. With over 60 lt of refining capacity coming up in the Indian Ocean region, we see huge scope to export raw sugar to this market, which is being supplied now by Brazil and Thailand," an ISEC official said.

In West Asia, besides Al Khaleej's 15-lt refinery, there are the 12.5-lt Jeddah and 7.5-lt Egypt refineries of the Saudi-based Savola Group. Also, there is 15-lt capacity in Bangladesh, 13 lt in Indonesia, 5-7 lt in Iran and 5 lt in Malaysia. "This is a market we can exploit, given that per tonne freight costs from Brazil to the West Asia are $60-62, against $30-32 from India," the official noted.

The sugar exported from India is of `plantation white' grade, with ICUMSA ranging from 80 to 200 (the higher the number, the lesser the whiteness). This is an intermediate category between `raw' (ICUMSA of 700 to 2200) and `refined' (45 ICUMSA) sugar.

Raw sugar exports

"Unlike raw or refined sugar, the market for plantation white sugar is limited to Bangladesh, Indonesia, Pakistan and some African countries. And with the new refineries, the future for plantation white exports is bleak. In fact, the $270 per tonne fob deal we have struck for raw sugar is higher than the $265 rate contracted recently by mills for white shipments," the official pointed out.

The alternative is to push raw sugar exports, which means sugar free from sulphur (used as a clarification agent). Secondly, the sugar should have very high polarisation or sweetness content of 99-99.3 per cent. Thirdly, there should be low levels of dextran, a microbial contaminant that raises energy consumption during the refining process.

"Our raw sugar is of ICUMSA up to 1200, which is superior to the 1800-2200 offered by Thailand. Further, unlike Brazil, we have guaranteed a dextran limit of 75 parts per million," the official claimed.

By saving on sulphur and other chemicals, the cost of producing raw sugar would be Rs 500-700 per tonne lower than white sugar. "By shipping in bulk and loading between 8,000 and 10,000 tonnes daily from Mundra, we can fully leverage our $30 freight advantage over Brazil," he added.

On the flip side, cane costs here, at $30 a tonne, are twice that of Brazil. "We must adopt the Thai model, where the Government provides direct subvention to cover the gap between what it wants growers to get and what mills can pay in order to competitively export raw sugar," the official felt.

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