June 19 (Bloomberg) -- India, the world’s biggest sugar consumer, may extend duty-free imports of raw sugar by eight months to March, bolstering local supplies and global prices, an industry official said.
The cabinet may approve a proposal from the food ministry in the next 15 to 20 days, said the official, who asked to remain unidentified as the information is confidential. The government may also include private traders in its plan to allow state-run companies to import as much as 1 million tons of white sugar by the end of this year, the official said.
Increased purchases by India may sustain a rally that’s made raw sugar the second-best performing commodity in the UBS Bloomberg CMCI Index in the past year. Raw sugar has advanced 34 percent this year on forecasts of a global deficit, driven mainly by the drop in India’s production.
“This will support global prices and will definitely have a negative impact on local prices,” Harish Galipelli, head of research at commodity brokerage Karvy Comtrade Ltd., said by phone from Hyderabad. “The monsoon is not progressing as anticipated so, if the government doesn’t extend imports, it will create further tightness in the market.”
Sugar stocks pared early gains in Mumbai trading today. Bajaj Hindusthan Ltd., the nation’s biggest sugar producer by capacity, rose 5.65 rupees, or 2.8 percent, to 206.25 at 12:07 p.m., after climbing as much as 4 percent. Balrampur Chini Mills Ltd., the second-biggest by capacity, rose 2.55 rupees, or 2.5 percent, to 105, after climbing as much as 3.4 percent.
Below-Market Prices
The cabinet may also clear another proposal by the food ministry to exempt mills from selling 10 percent of their output at below-market prices in the two months ending November if they start crushing cane by October, the official said. The move will boost supplies, the official said.
The government in April allowed duty-free imports of raw sugar until Aug. 1 to be processed and sold domestically, without any export obligation. Under an earlier program still in effect, the mills can import raw sugar without duty until Sept. 30 for processing and selling locally, provided they export an equivalent quantity of refined sugar within three years.
Government-run companies including State Trading Corp., MMTC Ltd., PEC Ltd. and National Agricultural Cooperative Marketing Federation of India Ltd. or Nafed, are allowed to import as much as 1 million tons of white sugar until Aug. 1.
Indian sugar producers are seeking an extension of duty- free raw sugar imports because a shortfall in cane supply may persist in the new year starting Oct. 1, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said in an interview on April 23.
Source : www.bloomberg.com