Movement of sugar consignments in the country, for domestic and export markets, has been affected due to logistics problems, mainly in getting required rail rakes, stakeholders said.
“Movement of sugar by rail from Maharashtra and Karnataka has been disturbed. This is for domestic as well as export markets. Transportation by trucks is also a problem,” said Prafaul Vithalani, President, All India Sugar Traders Association (AISTA).
On Thursday, the Centre acknowledged the problem in transporting sugar across the country and allowed mills to sell the sugar quota for December until January 31, 2022.
Rail rake shortage
“Now, considering the fact that some mills/traders are facing logistic(s) problem to lift the quota allotted in the month of December 2021 and in order to facilitate the dispatch of the remaining unsold quantity of December quota… It has been decided to extend the time period for the month sale quota of sugar for December 2021 by 1 month i.e. till 31.10.2022,” the Ministry of Consumer Affairs, Food and Public Distribution said in its order.
“The problem is in moving sugar from Karnataka and Maharashtra mills due to the shortage of rail rakes. But things are easing out,” said Ravi Gupta, Chairman, AISTA Export Committee.
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“The government’s priority is to move foodgrain through the railways. There are similar problems in Raipur, Chhattisgarh,” said Vidya Sagar VR, Director, Bulk Logix.
“Earlier, sugar mills could book half a rake, but after the Covid pandemic set in they have to book a full rake,” said AT Mohan of Chennai-based brokerage firm M.A.T and Sons.
AISTA’s Vithalani said the problem had cropped up since 38 lakh tonnes (lt) of sugar had to be transported to the ports within two months of the start of the sugar season from October 1. “Trucks were expected to transport a major portion of the sugar but the problem is with infrastructure, particularly when there is demand to carry such a quantity within a short span 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 per cent of the trucks have been seized by banks for non-payment of dues. This has resulted in truck freight rates shooting up,” he said.
Bulk Logix’s Sagar said there were other issues too with regard to getting rail rakes allocated. “There are restrictions on allocating rail rakes. You now need the district collectors permission for allocation of rakes,” he said.
“We didn’t expect the problem for Railways, though we thought we could face problems by road. But there is an additional problem for dispatching sugar for the domestic market,” said AISTA’s Vithalani.
Sugar can be sent by rail availing of the Tatkal system, where transportation can be done at a short notice. “While Tatkal charges are lower for exports, they are higher for the domestic market. As a result, sugar supply to the North-East has been affected,” Vithalani said.
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This is why the Centre has extended the time for dispatching the December sales quota till next month-end.
On the other hand, with heavy movement of sugar from the Indian subcontinent there is congestion of containers, particularly in the Gulf. “But consignments to Colombo (Sri Lanka) are moving freely,” said Sagar.
Sri Lanka buys a good volume of white sugar from India and for sometime, it had discouraged imports as it faced foreign exchange crises. Now, it has begun to ease the curbs, resulting in Indian sugar gaining.
Deals for 40 lakh tonnes
“But white sugar exports to Afghanistan continue to be affected due to political unrest there, but some containers have reached that country,” the Logix director said.
A good volume continues to go to Djibouti, from where sugar is transported to other African countries such as Ethiopia.
Sugar sector stakeholders are currently facing transportation problems since deals have been signed to export at least 40 lakh tonnes within two months of the start of the season (October 2021-September 2022). During the same time last year, very few deals were signed since the sugar industry was looking forward to export assistance from the Government.
No sops this season
An assistance to the tune of over ₹3,500 crore was announced on December 16 last year. It entailed exporters getting ₹6,000 for every tonne of sugar shipped out of the country. In the 2019-20 season, the Centre gave over ₹6,500-crore assistance that helped shippers get an average ₹9,750 a tonne to export sugar.
This year, exporters did not seek any assistance from the Centre since sugar prices in the global market skyrocketed due to low production and supply problems. With top producer Brazil’s production hit by weather, importing nations looked to India to fill the void.
Currently, raw sugar futures for March delivery are quoted at 18.79 US cents a pound (₹31,000) a tonne. White sugar futures in London for February delivery are ruling at $494.70 a tonne (₹36,725). Prices are off the highs of over 20 cents a lb for raw sugar and $500 a tonne for white sugar, respectively, witnessed earlier this year.
Indian sugar mills and exporters, who had signed a slew of deals even before the season began, are waiting for raw sugar prices to top 19.5 cents to sign new deals.
Indian sugar exports are buoyed with the commodity’s production estimated at 30.5 million tonnes compared with 31 million tonnes last season, besides 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 at around 60 lakh tonnes. “Though exporters and mills pegged exports estimate at around 60 lakh tonnes, we expect shipments to top 90 lakh tonnes,” said M.A.T and Sons’ Mohan.