April 17, 2017
Sugaronline | https://goo.gl/F3YhGD
A couple of Uttar Pradesh-based large sugar mills are planning to participate in the raw sugar import programme to extend operations of their refineries despite risk on profit margins due to high inland transportation cost from the designated ports to the refinery, according to India's Business Standard newspaper.
At least two large sugar factories with their refineries in Uttar Pradesh that Business Standard spoke to, are preparing to apply for import of raw sugar which they confirmed on condition of anonymity. Simbhaoli Sugars Ltd, according to its chief financial officer Sanjay Tapriya, has not yet decided whether to take part in import of raw sugar or not. "We are yet to take a final call on whether to import raw sugar or not this year," said Tapriya.
Balrampur Chini and Dwarikesh Sugar, however, have decided to stay away from raw sugar imports, confirmed their senior officials. "We do not see financial viability in converting raw sugar into refined sugar being designated ports away from the refinery," said Vivek Saraogi, Managing Director, Balrampur Chini.
Sugar mills participating in imports, however, are assessing financial viability for converting raw into refined sugar and sell the sweetener in and around Uttar Pradesh, the state which already flushed out with sugar this year with its estimated production of 8.7 million tonnes, nearly 40% of 20.3 million tonnes output estimated for the current crushing season.
"The landed cost of imported raw sugar from Brazil currently stands at INR31.50 (US$0.48) a kg as against the current prevailing price in and around Uttar Pradesh at INR35.50 a kg (ex-factory). Estimating INR2 as transportation and refining costs, Uttar Pradesh sugar mills will be able to sell the sweetener with INR2 a kg of profit. In this process, however, small sugar factories would not be able to process raw sugar being their cost of production higher because of lower volume. They will not fire boilers for processing few thousands of raw sugar," said a senior industry official.
Abinash Verma, Director General of the apex industry body Indian Sugar Mills Association, however sees better business potential for south India-based sugar mills being their refineries closer to the designated ports. Shree Renuka Sugars with its refineries in all three locations Haldia (West Bengal), Kandla (Gujarat) and two places in Karnataka will benefit from the government's move to allow 0.5 million tonnes of raw sugar import this year.
Other mills in these regions will also benefit with savings of INR4 a kg from processing of imported raw sugar and INR1.50 a kg of premiums over prevailing prices in Uttar Pradesh.
"We have refining capacity in all three zones where government has assessed a shortage. Hence, we will be applying for imports in the ports of south, west and east India," said Narendra Murkumbi, Managing Director, Shree Renuka Sugars Ltd.
Faced with a sharp deficit in sugar availability in the western and southern Indian states including Maharashtra, Gujarat, Tamil Nadu, Karnataka, Andhra Pradesh and West Bengal, the government allowed 300,000 tonnes of raw sugar import through ports in the South zone and 150,000 tonnes and 50,000 tonnes of the unrefined sweetener import through the west and east zones, respectively.
Interested importers may apply to the designated regional offices of the Directorate General of Foreign Trade until April 23 and quota allocations under TRQ will be handed out on April 27th valid for import upto June 30.
For actual import, however, the importers need to apply with Apeda which would issue a non-transferable Registration-Cum-Allocation-Certificate (RCAC) on first come first serve basis with a validity of 45 days and extendable for another similar period.