New Delhi: India needs to urgently import 3-5 million tonnes of white sugar and may ship in rice to calm food prices, a top aide of the prime minister said, signalling a tighter supply situation than previous estimates.
The hurry by the world’s top consumer of the sweetener comes three weeks after the Indian sugar mills industry body cut its import forecast.
A Singapore-based dealer said Indian imports would support global and New York raw sugar futures which fell to an eight-week low on Thursday and have ebbed from recent peaks on weak demand and new supply from Europe and Brazil.
“So the news from India could be seen in a supportive way,” he said.
India has faced falling output of key crops like sugar and widespread protests against food prices that are up 18% because the worst monsoon in 37 years damaged crops in 2009.
The new sugar season began with a record low opening stock of 2 million tonnes on 1 October. India may produce 14 million tonnes this year, significantly lagging its demand of 22 million tonnes, the prime minister’s economic advisory panel said on Friday.
The chairman of the panel, former central bank governor C. Rangarajan, said it would take up to three months for soaring food prices to ease even with the imports.
The panel said that even if consumption dips, “the stock position will rapidly approach the nil level” before high-demand for sweets during the festival season that begins in autumn.
“Under these conditions, it is imperative that urgent steps are taken to import white sugar to the extent of the shortfall in availability, which may be assessed at somewhere in the region of 3 to 5 million tonnes,” a statement from the panel said.
“It is therefore important that government takes the initiative to start the process.”
India had previously been hesitant to import large quantities of sugar, fearing locally grown and produced prices may dip.
Processing of imported raw sugar in the key sugar-producing state of Uttar Pradesh, India’s most populous province, was stopped last November following protests from farmers seeking higher cane prices.
“A lot of the opportunity now to process raws has gone. Some mills are already beginning to close,” said a dealer, who expects India to import 7.5 million tonnes in the current year.
Agriculture minister Sharad Pawar has repeatedly said the food situation was under control, helped by government measures such as easier imports and restrictions on stocks.
Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association, said the latest panel assessment was more realistic.
“Its a frank admission. At least 3-4 million tonnes of stock is needed in the new season to meet festival demand. The extent of imports would also depend on next monsoon.”
The Indian Sugar Mills Association however sees output to be 2 million tonnes higher than the 14 million tonnes forecast by the panel.
“I think the production numbers are pessimistic. Production as of date is higher than last year. We don’t agree with the projected sugar stock,” said Narendra Murkumbi, vice president of the Indian Sugar Mills Association.
On 27 January, the millers’ body said India needed 6.1 million tonnes of sugar imports this year, of which 4.5 million tonnes had already been contracted, a lower estimate than others.
Rice evenly poised
But the situation in rice was evenly poised as official agencies were likely to buy only 27 million tonnes from farmers, 6 million tonnes lower than last year, the panel said, adding that India should consider imports to build up stockpiles if rice purchases by official agencies fall below 27 million tonnes.
“Lower output and procurement makes for lower availability and even with the fairly large official stocks it can result in conditions with the potential for fuelling inflationary expectations. This warrants some policy action,” the panel said.
It said the government should try to reduce rice demand by replacing some amount of rice with wheat in its welfare schemes.
A trading manager at an international firm in Singapore said India may buy up to 2 million tonnes or rice to calm prices, but the country does not have space to store it.
“I am more inclined to believe that they will first assess rabi (winter-sown) crop output in March and April before taking a decision,” he said.