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

Will cover following points 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 mn. tons

Sugar trade from & to India

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 Opening balance (as on 1st Oct, 2016) 7.75 mn tons Estimated sugar production 20.30 mn tons Estimated imports 0.50 mn tons Sugar availability during the season 28.55 mn tons Estimated sugar sales 23.8-24.0 mn tons Closing balance (as on 30th Sept, 2017) 4.55 – 4.75 mn tons 2

Is 4.55 – 4.75 mn tons of OB as on 1st Oct, 2017 good enough?

Why do we even require an OB on 1st Oct. 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?

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

When will new sugar hit the market in 2017-18? Sugarcane crushing to start early in Oct, 2017 Sugarcane availability expected to be much better in 2017-18 SS Festivals are earlier, so farm labour available in October itself Hence, new season’s sugar in market in Oct, 17 itself 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 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

Cane Pricing Policy

Cane price in India is fixed by Government 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 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 Rs. per quintal

FRP of Sugarcane Vs MSP of Paddy & Wheat

Rationalisation of cane pricing policy Revenue sharing formula or a linkage b/w cane & sugar price 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) 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

Change over to GST expected from 1st 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 and 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 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 …. No need of any further sugar imports Enough sugar is available in India Sugar production expected to normalise next year Healthy OB of 4.5 to 4.7 mn tons There is need to rationalise sugarcane pricing policy Will make Indian sugar competitive globally GST expected to be implemented from July 2017 Not much different rates for sugar and its by-products Regime may be simpler and more convenient

Thank you dgisma@indiansugar.com