NEW DELHI: Barely weeks after sugar prices hit a peak of Rs 50/kg, a panicky industry has now started lobbying for clamping a 60% import duty on ready-to-eat white sugar at the earliest. Apprehensions mounted sharply in the sugar industry after international prices dipped sharply for white sugar, marking a seven-month low and spelling markedly lower consumer prices for sugar in the coming days. The import duty was reduced to zero mid-last year and extended up to December this year.
Internationally, the price of white sugar plunged by $30 within a week and it witnessed a 20% correction in the past few weeks. The sharp fall in overseas sugar prices also spilled over to domestic prices. Following global prices and helped by a spate of decisive government measures to control sugar prices, consumer prices in India have also corrected by approximately 23% from the highs of January 2010.
Crucially, the tumbling prices globally and locally were triggered off to a good extent by signals from the high import dependency by India, the world’s biggest consumer. On the flip side, the lower dependency signals now have triggered off the price plunges. Local sugar supply estimates for 2010-11 surged to an estimated 26 mt —two million tonne higher than the annual domestic consumption, indicating that India’s import dependency in the coming year would be virtually nil.
While indications were that traders and speculators in the global market turned highly cautious after India’s lower import dependency signals for the coming year, the fact that the world’s biggest producer Brazil is expected to come up with a good crop (crushing to start by the end of March/April 2010) is also expected to temper world sugar prices further. That could be compounded by increased sugarcane acreage in India.
“We have urged the government to re-impose import duty on white sugar at the earliest as our survival is at stake. Sugar is being offered at the Kandla port at Rs 30,000 per tonne and there are no takers. World prices are also nose-diving, signalling the end of a profitable cycle ” an Indian Sugar Mills Association (ISMA) official said.
Production price for sugar, industry sources contend, are now at over Rs 35/kg, making it impossible to expect a prolonged profitable streak to persist. Significantly revised projections by UP and Maharashtra only e boosted 2010-11 sugar production estimates to 16.8 million tonne, much lower than the 23-24 million tonne annual consumption. But an estimated opening stock of 4.4 mt and around 5 mt imports have boosted total supply projections to upward of 26 million tonne, spelling a marked supply glut and sending sharp negative pricing signals to the market.
The Centre’s move of indirectly forcing bulk users to import all their sugar needs for the next three months from February 20 has also freed up nearly 4mt of sugar for the domestic market, pressuring down consumer prices.
Ironically, it was just last month that the Prime Minister’s Economic Advisory Council (PMEAC) had suggested that the Centre import white sugar to bolster domestic availability to ease consumer prices. This led to speculation on more imports soon and kept dipping sugar prices buoyed up for a while longer.
Source : The Economic Times