SUGAR INDUSTRY IN INDIA Abinash Verma DG INDIAN

SUGAR INDUSTRY IN INDIA: Abinash Verma, DG INDIAN SUGAR MILLS ASSOCIATION, NEW DELHI

Will cover following points 2 Current sugar scenario Sugar production Sugar sales/ demand Sugar stocks needed Cane pricing policy in India GST on sugar industry products

Sugar Production & Consumption in India 3 mn. tons

Sugar trade from & to India 4

5 Domestic sugar demand in current season Sugar sales by factories lower than last year Oct ’ 16 - Jan. ’ 17 sugar sales lower by 0. 75 mn tons Field reports suggest sugar sales in March ‘ 17 dull Beverages, sweet makers etc. reporting lower sales/ growth Last sugar season 2015 -16, full year; 24. 8 mn. tons was sold Therefore, annual demand in 2016 -17 estimated to be lower at 23. 8 to 24 mn. tons

Current year 2016 -17 sugar balance sheet 6 Opening balance (as on 1 st Oct, 2016) Estimated sugar production Estimated imports Sugar availability during the season Estimated sugar sales Closing balance (as on 30 th Sept, 2017) 7. 75 mn tons 20. 30 mn tons 0. 50 mn tons 28. 55 mn tons 23. 8 -24. 0 mn tons 4. 55 – 4. 75 mn tons 2

7 Is 4. 55 – 4. 75 mn tons of OB as on 1 st Oct, 2017 good enough?

Why do we even require an OB on 1 st Oct. 8 Basically to meet the domestic demand in the interim period, before the new sugar from new sugar comes into the market The question, therefore, is When will new sugar hit the market?

9 Regulated Release Mechanism of sugar sales Under control regime of regulated release mechanism Govt. decided how much each factory could sell each month Between production, reporting, release order and sales, there was a lag of at least 45 days The norm then of OB was 3 months consumption equivalent The release mechanism was abolished from April, 2013 Now there is no time lag between production & sale Sugar produced in Oct. is now available for sale in Oct itself

11 When will new sugar hit the market in 2017 -18? Ø Ø Sugarcane crushing to start early in Oct, 2017 Ø Sugarcane availability expected to be much better in 2017 -18 SS Ø Festivals are earlier, so farm labour available in October itself Hence, new season’s sugar in market in Oct, 17 itself Ø Ø So, need of old sugar at best till beginning of Nov, 17 The 4. 5 to 4. 7 mn tons of OB will last till end of Nov. ’ 17 6

No further need of any sugar imports 11 OB will last till end of Nov, 2017 Whereas new sugar from 2017 -18 available from Oct, 2017 itself Sugar production expected to be back to normal in 17 -18 Good sowing reports Better rainfall in 2016 and good water availability in reservoirs

12 Cane Pricing Policy

Cane price in India is fixed by Government 13 Central Government fixes cane price every year, called FRP Which then becomes the minimum price that a sugar mill has to pay 5 State Governments fix another higher price called SAP There is no linkage with revenue realised or with sugar price Expected sugar prices are assumed when the FRP is recommended, which have mostly gone wrong

Cane Price fixed by Government of India 14 Rs. per quintal FRP has increased very steeply 3 times in 09 -10, 12 -13 and 13 -14, which made FRP also unaffordable for the industry. Proposed FRP for 2017 -18 SS is again very steep increase over last year

FRP v/s average ex-mill price in last 7 -8 years 15 Rs. per quintal

FRP of Sugarcane Vs MSP of Paddy & Wheat 11

Rationalisation of cane pricing policy 17 u Revenue sharing formula or a linkage b/w cane & sugar price u Expert (Rangarajan) Committee recommended in 2012 Decontrol of sugar sector Decontrol sugarcane pricing Cane price to be 70% of revenue from sugar and primary by-products or 75% of revenue from sugar alone (5% weightage to by-products) u If Government still wants the farmers to get minimum FRP, which if higher to above formula, gap be filled through a Fund to be created by Government

18 Change over to GST expected from 1 st July 2017 Currently, different taxes levied by Centre and different States Different rates and different tax regimes Non-availability of credit on input taxes with the output With GST, almost all the taxes on goods and services under one taxation system Expect simplicity to understand comply Uniform rate of tax on a commodity across the country Reduction in the cascading effect of the input taxes

Expected GST for sugar industry 19 Sugar currently has tax, including cess, of about 4. 5 to 5. 5% GST on sugar at the lowest rate of 5%, will not be much different Cess on sugar will be subsumed On sugarcane, no central tax, but few States levy purchase tax Agriculturists to be exempted from GST Rumours of ‘reverse’ tax on cane, though unconfirmed Some States currently levy a tax on ethanol Once GST is implemented, inter State taxes will not remain and movement will become smoother

Concluding …. 20 u u No need of any further sugar imports u Enough sugar is available in India u Sugar production expected to normalise next year u Healthy OB of 4. 5 to 4. 7 mn tons There is need to rationalise sugarcane pricing policy u u Will make Indian sugar competitive globally GST expected to be implemented from July 2017 u Not much different rates for sugar and its by-products u Regime may be simpler and more convenient

Thank you dgisma@indiansugar. com