Raw sugar piles up at ports

Nearly 750,000 tonnes of imported sugar are stuck at the Kandla and Mundra ports even as prices skyrocket in the domestic market. That's because the sugar importing mills in Uttar Pradesh have still not been able to arrive at an agreement on processing imported raw sugar by millers in Maharashtra and Gujarat.

The stalemate continues despite the Centre's decision to allow UP millers to process imported raw sugar from anywhere in the country due to the Mayawati government's advisory to the railways not to bring imported raw sugar into UP.

The UP millers want to pay a conversion cost (conversion of raw sugar into refined sugar) of Rs 4,000 per tonne, but nearly 20 cooperative mills from Maharashtra and eight from Gujarat are demanding Rs 5,920 per tonne as processing and service charges.

A source at one of the UP mills who did not want to be identified said "Mills are working out various options. One could be an outright sale at the current prevailing price." The stock was bought during October-December at an average landed price of $500 per tonne. The recent spurt in raw sugar price in the international markets will lead to a rise in net profit of more than $175 per tonne. The second option is processing raw sugar during the off season (that is, April-September).

Union Agriculture Minister Sharad Pawar's intervention to sort the issue between the millers and processors has not helped either.

Recently, the Centre extended the deadline for duty-free import of raw and white sugar and removed quantitative restrictions. A Mumbai-based analyst, however, said UP millers anticipate more gains by keeping the stock at the port rather than processing it. That's because of the expectation that the international prices of sugar will go up further.

Processors from Maharashtra and Gujarat have just 60 days more before the crushing season gets over. Sources said they can process raw sugar along with sugarcane in the ratio of 25:75 and thus can process 500,000 tonnes provided the UP millers take an early decision.

Prakash Naiknavare, managing director of the Federation of Cooperative Sugar Factories in Maharahtra, said the crushing season is going on in full swing. But an early resolution of the dispute with UP millers will not only increase availability of sugar nationally but will help processors to improve their capacity utilisation.