Govt to build sugar stocks, adding to import needs

Govt to build sugar stocks, adding to import needs

New Delhi: The Centre aims to stock enough sugar to meet demand for 3-4 months, a government minister said on Tuesday, indicating higher sugar imports to lift reserves from their current depleted level of around 1 month’s supply.

The world’s top sugar consumer uses around 2 million tonnes of sugar a month, implying stockpiles will need to rise to 6-8 million tonnes by the end of the October-September marketing year, from 2.4 million tonnes on 1 October.

Agriculture minister Sharad Pawar told Parliament during a discussion on sugar prices that India, also the world’s second largest sugar grower, was likely to produce 16 million tonnes in the 2009-10 season, in line with previous forecasts.

“If India wants to build stocks for 3 months demand, it needs imports of 8 million tonnes," Mukesh Kuvadia, secretary general of the Bombay Sugar Merchants Association, said.

In 2008-09, India contracted imports of 5 million tonnes, helping raw sugar futures rise to the highest in nearly three decades as the country switched from exporting around the same quantity the previous year.

Industry officials say that out of contracted imports of 5 million tonnes of sugar, mostly raws, in 2008-09, 1 million tonnes have already been processed and the remaining 4 million tonnes will add to supplies in the year that began on 1 October.

This will leave a deficit of 11 million tonnes if stocks at the end of September 2010 are equivalent to four months demand, according to a Reuters calculation.

Some industry officials say import needs may be even higher as a significant amount of cane was being bought by producers of jaggery, a coarse sweetener.

Minister of state for agriculture KV Thomas told Parliament that jaggery was also being used to make alcohol, and trade officials say this allows jaggery makers to pay a better price to cane farmers.

Pawar said diversion of cane to users other than sugar mills had reduced domestic sugar supply.

In 2007-08, India exported 5 million tonnes of sugar after production surged to 26.3 million tonnes, but the country switched to imports of a similar quantity in the following year as output fell to 15 million tonnes.

The deficit brought stocks down from 10.5 million tonnes at the start of 2008-09.

The government, worried about rising prices, has eased controls on sugar imports to help improve domestic prices.

“India needs additional sugar imports. Small news of any deficit boosts prices. This has happened even in wheat, where India has ample stocks," said Vandana Bharti, senior analyst at SMC Comtrade Ltd.

India has significantly raised the price at which official agencies buy wheat from farmers in the past three years, encouraging many cane growers to switch to wheat.

In 2008-09, the worst monsoon in 37 years hit the cane crop, and the government expects cane output to fall 8.8% to about 250 million tonnes in the current year.