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Production picks up, sugar crisis on its way out

business Updated: May 09, 2010 01:26 IST
Zia Haq
Zia Haq
Hindustan Times

India’s sugar production has shown signs of picking up, prompting the government to consider reversing some sharp measures it had taken to bring down the prices.

Domestic production for the current sugar crop year (October 2009-September 2010) is now estimated to be over 18 million tonnes, up 11 per cent from earlier industry projections of 16 million tonnes.

Hit by last year’s drought, states had predicted even lower estimates of 14 million tonnes.

Aided by both improved domestic forecast and higher production in Brazil, the world’s biggest exporter, sugar prices have dipped to Rs 35 a kg from a peak of Rs 50 last year — a 30 per cent fall.

“World prices continued to decline through April,” Dutch investment bank, Rabobank, which tracks global commodity markets, told HT.

“The import duty, waived off to boost supplies, could now be re-imposed,” a senior government source said. The sweet respite is now stoking problems for millers. Cheap duty-free imports are impacting sales of domestic sugar.

Less-profitable sales eventually affect farmers, who depend on millers for payments.

“(Re-introducing) import duty is imminent,” said M.N. Rao, deputy director-general of the Indian Sugar Mills Association. Rao said since production would be better than expected, the industry, on which farmers depend, needs some support. “Or payments to farmers may suffer,” he said.

“The situation is comfortable, but we can’t say it’s hunky dory until we return to a surplus position,” N Sanyal, joint secretary in charge of sugar, told HT.

India requires 23 million tonnes of the sweetener annually, but 60 per cent of it is used up by commercial buyers.