Govt rules out increasing sugar import duties to contain prices.

New Delhi: India, the world’s biggest sugar consumer, will refrain from raising import duties until September to prevent a rally in local prices, food minister K.V. Thomas said. Futures in Mumbai fell.

We don’t want prices to rise and these duties will keep the sentiments in the market under check, Thomas said in an interview in New Delhi on Tuesday. We will decide whether to increase the duties on imports after August as these three months are crucial for sugar prices.

Sugar imports into India have climbed in the past two months after futures in New York fell to a three-year low, prompting calls from domestic producers to increase taxes on raw and refined sweeteners to 40% from 10%. Futures in Mumbai climbed about 8% from a 10-month low reached on 8 April on speculation that a drought in some cane-growing regions will lower production in the season starting 1 October.

It doesn’t make sense for them to play with the import duty until the harvest starts because it won’t be before September that they will get a better idea of what the crop will look like, Kona Haque, an analyst at Macquarie Group Ltd., said by phone from London on Wednesday. If they have a big crop then they may want to raise the import duties.
India’s production may fall 10% in 2013-2014 from an estimated 25 million tons this season as the drought in Maharashtra and Karnataka states cut cane planting, Thomas said.

Global surplus

The monsoon has been fantastic so far, so you could end up with a crop similar to this year’s, Haque said. It makes sense for them to import now as world prices are so much lower than domestic prices, so they will probably continue to import to refine and re-export. Imports, however, won’t be enough to lift world prices because of the surplus.

Futures have fallen 53% since reaching a 30-year high of 36.08 cents a pound in February 2011, as farmers from Brazil to China boosted plantings. Futures, down 13% in 2013 to 16.96 cents a pound, are heading for a third year of declines. That would mean the longest slump since 1992. The June-delivery contract fell 1.4% to Rs3,040 ($52) per 100 kilograms on the National Commodity & Derivatives Exchange Ltd. in Mumbai on Wednesday.

Production globally will be a record 10 million tons more than consumption in 2012-2013, boosting a global glut, the London-based International Sugar Organization said last month. Indian processors have imported 1.1 million tons of raw sugar between 1 October and 23 May, including as much as 468,000 tons for sale in the local market, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said last month.

Inventories in India may jump 45% to 9.7 million tons on 1 October from 6.7 million tons a year earlier as output exceeds consumption for a third year, Kumar said. That will leave an exportable surplus of 3.87 million tons after keeping about 5.8 million tons to meet demand for three months, he said.

Source : livemint.com