NEW DELHI: India, which vies with Brazil as the top sugar producer, increased the minimum selling price of the sweetener by 6.9% to help mills pay farmers on time.
The factory-gate selling price for millers was raised to ₹31 (0.44 cents) per kilogram from ₹29 at present, according to a government notification on Thursday. The benchmark price is effective immediately, Food Minister Ram Vilas Paswan said at a press conference in New Delhi.
A rise in the state-controlled price may prompt millers to sell more locally and reduce exports, supporting the global market. Sugar stockpiles in India, where production is set to exceed local demand for a second year, almost doubled to 15.4 million metric tons as of 31 December from a year earlier following bumper output, according to Indian Sugar Mills Association data.
The move is also expected to help millers, who are under pressure to clear dues to cane growers. Mills owed ₹20,170 crore to farmers as of 13 February, Paswan said. Timely payments will encourage farmers to expand the area under sugarcane and prevent them from switching to other crops.
“There is a concern and fear among the export houses that there can be some defaults of deals by sugar mills because of an expected increase in minimum selling price," Praful Vithalani, chairman of the All India Sugar Trade Association, said before the announcement. It will be “difficult for India to export" an estimated 3-3.5 million tons in the year ending 30 September, he said.
The sugar association had asked the government to increase the minimum sale price to ₹35-36 a kilogram. The current factory-gate prices are about ₹5-6 per kilogram below the output costs, according to the millers group.
India’s sugar production is likely to drop to 30.7 million tons this year from an all-time high of about 32.5 million tons estimated for 2017-18, according to the sugar group. Sugar export contracts for this season total 1.8 million tons so far, said Vithalani.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.