New Delhi: “India has extended tax-free white sugar imports until December 2010 as the world’s biggest consumer of the sweetener faces robust demand and shrinking domestic output,” farm minister Sharad Pawar said on Wednesday.
ICE March raw sugar was up 0.42% at 23.73 cents a lb by 3.04pm, and analysts said India’s move would support high prices, but imports are not expected to jump in the short term as mills were about start crushing cane.
“The situation is tight in sugar. Duty-free sugar imports will bridge the supply gap,” Pawar said.
India’s cane output is expected to fall after the worst monsoon in nearly four decades ravaged many cane fields.
In April, India permitted duty-free imports of white sugar until 30 November, which Pawar said last month could be extended to June 2010.
“Clarity on the import regime up to the end of next year was was useful,” said Ajit Chowgule, secretary of the Maharashtra Co-operative Sugar Factories Federation Ltd.
“The minimum period for the sugar cycle, starting from cane planting to end product is 12 months,” he said adding: “It helps if a policy is announced beforehand. Both farmers and industry get enough time to plan.”
Pawar said that the country was likely to produce 16 million tonnes of sugar in the year that began this month, lower than the 18-million-tonne forecast made by farm ministry official Abinash Verma at a sugar conference in Sao Paulo on Tuesday.
India’s annual sugar consumption is about 23 million tonnes.
“It is not simple for me and my ministry to manage the sugar situation,” Pawar said.
India’s sugar season runs from October to September.
The country’s sugar output in the year that ended on 30 September fell to 15 million tonnes from 26.4 million, forcing it to import 5 million tonnes and lifting raw sugar futures to the highest in nearly three decades.
Luke Mathews, commodity strategist at Commonwealth Bank of Australia said that India’s latest move reflected supply concerns.
“It’s not an act of desperation. It simply reflects the situation that supplies are insufficient to meet demand,” he said.
“Whether it causes markets to react today or tonight remains to be seen, but the fact is it’s another bullish fundamental story in the sugar complex,” he said.
Amol Tilak, head of research, at Kotak Commodity Services said that the announcement would renew buying interest and lift raw sugar futures.
This month, Kushagra Nayan Bajaj, joint managing director of India’s top sugar firm, Bajaj Hindusthan, said that India might import 7-9 million tonnes of sugar in 2009-10.
Analysts said that the imports would not surge in the next few months.
“Imports are likely to rise, not in the short run, as the crushing season is about to begin, but in the medium-term,” said Veeresh Hiremath, analyst with Hyderabad-based brokerage Karvy Comtrade.
“Low cane prices had hit sowing, and the decision to extend imports was an outcome of government policy,” said Sudhir Panwar, head of the Kisan Jagriti Manch, a farmers’ body.
“The extension reflects poor stocks and is indicative of faulty official policies for sugar sector,” he said adding: “The government has failed to provide the incentive of higher support prices.”