Sugar stocks rose in trade today after the government decided to resume export of raw sugar to China next year. Stocks of Avadh Sugar and Energy (4.27%), Dhampur Sugar (5.83%), Balrampur Chini Mills (5.26%), EID Parry (6.67%) , Ugar Sugar (4.99%) and Magadh Sugar and Energy (4.26%) rose in trade today.
The development is a positive for sugar manufacturers as India has been eyeing overseas markets to shed surplus stocks that have muted prices and created financial distress in mills.
India plans to export 2 million tonnes of sugar to China to cut trade deficit with the neighbouring country, a government statement said.
"Export of raw sugar from India to China will begin early next year. A contract for exporting 15,000 tonnes of raw sugar has been entered to by the Indian Sugar Mills Association (ISMA) and COFCO, a Government of China run public sector company," the commerce ministry said in the statement.
"Raw sugar is the second product after non-basmati rice that China will import from India. It is a move to reduce the $60 billion trade deficit that China has with India," the statement said.
India's export to China in 2017-18 amounted to $33 billion, while imports from China stood at $76.2 billion.
India produced a record 32.5 million tonnes of sugar in the 2017-18 marketing year and the output is estimated to be around same level or slightly lower in the current marketing year. The annual domestic demand is around 26 million tonnes. The country also has an opening stock of 10 million tonnes at the start of the current marketing year that started last month.
To liquidate surplus stock, Indian government has asked sugar mills to mandatory export 5 million tonnes in 2018-19 and has even announced some financial assistance to facilitate outward shipments.
The government is also negotiating with many countries, including China and Indonesia, to boost exports.
China's sugar production is around 10.5 million tonnes as against its annual demand of 15 million tonnes. The neighbouring country imports sugar to meet its domestic demand as well as to build buffer stocks. It issues quota, twice a year, to traders to import sugar from world market.