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Business News/ Opinion / Online-views/  India to build 2 mn tonnes of sugar reserves
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India to build 2 mn tonnes of sugar reserves

India to build 2 mn tonnes of sugar reserves

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By Pratik Parija/ Bloomberg

New Delhi: India, the world’s second-biggest sugar producer, will build stockpiles of 2 million tonnes to help arrest a slide in domestic prices amid record output.

The government will also pay exporters up to Rs1,450 ($33) a metric tonne to meet transportation costs to the ports, Agriculture Minister Sharad Pawar said on 29 March.

India’s output will reach a record 26.1 million tonnes this year, 550,000 tonnes more than previously estimated, according to C. Czarnikow Sugar Ltd. Domestic sugar prices have fallen by a fifth in the past year, reducing earnings at Bajaj Hindusthan Ltd and other local producers.

White sugar, traded in London on Euronext.liffe, has fallen 30% in the past year as global production is heading for a surplus for the first time in four years. That’s made exports unattractive for Indian mills, which have shipped 350,000 tonnes since the government ended a six-month in January, compared with this year’s target of 1 million tonnes.

Bajaj Hindusthan, India’s biggest sugar maker, reported a second straight drop in quarterly profit on 29 January, while Shree Renuka Sugars Ltd, the third biggest, reported on 25 January that its first-quarter profit halved from a year earlier. Balrampur Chini Mills Ltd, the second-biggest, reported a 52% decline in net income in the quarter ended 31 December.

Storage costs

The government will have mills keep the stockpiles and pay them storage costs, unlike China which builds reserves and sells locally or exports as the need arises, Pawar said.

China, the world’s second-biggest sugar consumer, last year auctioned more than 1 million tonnes domestically to bring down prices and to dampen inflation.

India’s ruling Congress party government, which faces seven assembly elections this year, is trying to stem a further drop in prices to protect the 45 million farmers who grow sugar cane. The most important contest is next month in Uttar Pradesh, the nation’s biggest cane-growing state that sends a seventh of all lawmakers to federal parliament.

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Published: 29 Mar 2007, 04:16 PM IST
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