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Govt to Cut Mills' Obligation to Sell Low-Cost Sugar.


Date: 30-09-2010
Subject: Govt to Cut Mills' Obligation to Sell Low-Cost Sugar
India may allow sugar exports after the Diwali festival in November and let millers sell a smaller proportion of their output at low, state-set rates as production is set to rise by a third, its farm minister said.

Sugar output in India, the second-biggest producer and top consumer is likely to rise to 25 million tonnes in the new season that begins on Oct. 1, as adequate monsoon rains have helped the cane crop bounce back after last year's drought.

"We will assess the supply situation after Diwali and consider allowing exports," Farm Minister Sharad Pawar told reporters on Wednesday.

India's sugar consumption peaks during the Hindu festival of lights, which will be celebrated in the first week of November.

Pawar said mills would have to sell only 10% of their output at low, state-set rates, down from the current 20%.

The move, which is expected to release 2.5 million tonnes of sugar into the market in 2010/11 along with India's likely return to exports after being a big buyer for two years, would ease the global supply situation.

New York raw sugar futures touched a seven-month high of 27.15 cents a lb on Tuesday but eased to 26.59 cents on Wednesday as rain in Brazil, the top producer, ended a dry spell.

India's large imports after last year's drought had driven global sugar prices to the highest in 29 years in February.

Indian millers welcomed the government's decision to reduce the compulsory sale of subsidised sugar.

"This step reflects the government's confidence about production. It's a timely decision," said the chief executive of Simbhaoli Sugars Ltd.

Avinash Verma, head of the Indian Sugar Mills Association, a body of private millers, said: "It is a good move because we have healthy carryover stocks."

India's sugar stocks on Oct. 1, the start of the new season, are expected to be 5 million tonnes, Jayantilal B. Patel, president of the National Federation of Cooperative Sugar Factories Ltd, said.

Last year stocks at the start of the season had dipped to 3.2 million tonnes from 10 million tonnes in October 2008.

Patel said sugar availability in 2010/11 could swell to 30 million tonnes while demand would be 22.5-23.0 million tonnes.

Subsidised sugar sales to the government, so-called levy sugar, have been a sore point with millers, who have demanded a reduction in state controls in the sector as supplies and prices have stabilised after two years of scarcity.

The government buys sugar from mills for welfare schemes.

"This step will raise profitability of mills. It will also ease prices in the open market," Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association, said.

Source : moneycontrol.com

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