New Delhi: The sugar industry in the country is hopeful of meeting domestic demand despite an anticipated 43% drop in production this season.
“With a carry forward stock of over eight million tonnes (mt) of sugar and the government allowing import of raw sugar, there won’t be any shortage,” said Samir Somaiya, president, Indian Sugar Mills Association, or Isma.
Isma estimates sugar output in the country to be 15mt in the current sugar season, 11.4mt or 43% less compared with the output a year earlier. Sugar season starts in September and ends in October.
Also See Lean Season (Graphic)
The government expects the demand to touch 22.5mt in this season. With the carry forward stock, the supply matches the demand.
Somaiya is of the view that imports will take care of the shortage, if there’s any. “But there is no need for the government to go all-out on imports as this may result in a glut,” he argued.
However, S. Raghuraman, head of trade at Agriwatch, a New Delhi-based research firm in agri-commodities, disagrees. “The government needs to be aggressive on imports or else the prices of sugar will rise steeply,” he warned.
Isma’s announcement of a decline in sugar output has already resulted in a price rise. On Tuesday, sugar prices in the National Capital Region (Delhi and its surrounding areas) rose by Rs50 a quintal.
Raghuraman also said that it was the stock restriction that has helped keep the prices of sugar low.
“Otherwise due to apparent scarcity, the prices would have risen much more,” he added.
To arrest the price rise, the government last month set 200 tonnes as the limit up to which a trader could hold sugar stocks. To ensure that there is no shortage in the market, the government on Tuesday allowed release of 5.4mt of sugar for April-June 2009.
“This will help arrest rising prices,” Raghuraman said.
But Somaiya says the government is re-regulating the industry. “The government should devise a long-term strategy for sugar where the commodities should be left for the market forces to determine prices,” he said.
“Because the sugar industry is not getting good prices, it is unable to pay up the farmers and arrears are mounting. This is (also) resulting in shrinkage of sugar cane area besides leading to low output,” Somaiya added.
The country’s sugar cane acreage is estimated to have fallen by 1 million ha to 4.2 million ha this year, compared with a year ago.
India saw a record sugar production of 28.4mt in 2006-07, but prices fell subsequently because of the glut. The sugar industry, therefore, wants less sugar to be injected into the market.
Graphics by Sandeep Bhatnagar/ Mint