Contrary to some expectations India has allowed 500,000 tonnes of sugar exports under its Open General licence (OGL). Despite forthcoming local elections and some concerns over agflation India has permitted the full 500,000 tonnes for export. Previously 200,000 tonnes had been expected following comments in recent days.
It is expected that over 1 million tonnes of sugar for export will be approved under OGL during the year once India has confirmation of the size of its crop. India is the world's second largest grower.
India is still to announce whether the decision to permit 500,000 tonnes of sugar for export is to be ratified. Sugar prices have fallen sharply recently and India’s indecision may cost exporters if after delays the panel of ministers approves sugar exports under its Open General Licence (OGL).
India is the world’s second largest producer of sugar after Brazil. The delay in confirming OGL exports had been to ensure sufficient domestic supplies and to avoid the impacts of agflation.
India is expected to produce between 24.5 million tonnes and 25.5 million tonnes of sugar. Indian consumption is in the region of 22 million tonnes. Indian whites were available at $720 per tonne down by approximately $50.
No decision was reached during the previous meeting on whether to permit up to 500,000 tonnes of sugar exports under Open General Licence (OGL) due to the absence of a number of government ministers. Discussions were widened to include a number of Indian government ministers due to the political sensitivity of the ‘agflation’ issue and the risk of food price rises. A decision on the matter may be made in the next two weeks.
India’s indecision has ensured that sugar prices remain high in the face of tight supply. India is the second largest producer of sugar and its largest consumer.
The indian government discussed sugar prices and domestic sugar stocks today. The panel chaired by Finance Minister Pranab Mukherjee discused the topic which was scheduled on the agenda for today’s meeting but did not reach a decision due to the absence of Sharad Pawar the Minister for Agriculture, Anand Sharma the Commerce Minister and K.V. Thomas the Food Minister.
Indian exports have not been banned but sugar shipments have had restrictions placed discouraging exports to protect domestic sugar supply in the wake of rising agflation. Sugar currently sells at Rs 32-35 per kg retail. Prices have been relatively stable for past few months due to higher production.
Sugar production is expected to be 24.5 million tonnes during the 2010/11 season which started in October and runs through to July. Production is up from 19 million tonnes last year. Domestic consumption is approximately 22 million tonnes.
The Sugar Mills Association has suggested that one million tonnes of sugar should be permitted for export under OGL due to this being surplus to India’s domestic consumption.
A further meeting of the panel is expected in the next few weeks. The sugar market awaits the decision in an indication that supply will ease.