Indian buying pushes up global sugar prices 15%

International raw sugar prices have shot up by around 15 per cent since the government allowed the import of raw sugar under the advance licence scheme a little over a month ago.

Some Indian companies had imported raw sugar at between $220 and $230 per tonne immediately after the new policy was announced, current prices in the international markets were around $260 per tonne.

Several industry players said prices rose because India was expected to import almost two million tonnes of raw sugar in the coming months.

"If you look at the global scenario, the shortfall in sugar production this year is going to be only 0.5 million tonnes. So there doesn't seem to be an economic rationale for prices to rise so sharply unless you factor in India's entry into the market," said an industry source.

At current prices, import of raw sugar was unviable.

"Even when the price was $233 per tonne, co-operative mills were reluctant to import. The current prices are too high," said Vinay Kumar, the managing director of National Federation of Cooperative Sugar Factories Ltd.

"Imports require collective sacrifice on the part of the industry," Shanti Lal Jain, president of the Indian Sugar Mills Association, added.

The government had allowed import of raw sugar under the advance licence scheme in view the sharp drop in sugar production expected this season, which could push up sugar prices. Under the scheme, companies would to export within two years sugar equal in quantity to the amount of raw sugar imported.

Some companies have imported around 180,000 tonnes of sugar through the Indian Sugar Export-Import Corporation under the scheme.

Industry sources warned that if sugarcane production in the country continued to be low for another two years, there would be a sugar shortage.

This would mean more imports and companies importing sugar now would default on their export obligations.

However, both Kumar and Jain said that the current high prices of sugar in the domestic market would lead to rise in area under sugarcane cultivation in 2005, and higher sugar output, thereby eliminating the need for sugar imports.

Sugar industry sources said the current opening stock was 8.5 million tonnes, and productsion this year would be 12 mn.t., taking availability to 21mn.t.. Consumption was expected to be 18.5mn.t., while buffer stocks would take up 4.5mn.t. and imports would be around 2mn.t..

1.3mn.t. sugar quota released

The government has released 1.3 million tonnes of sugar for free sale in November 2004, marginally higher than 1.26 million tonnes released in November 2003, to check any rise in sugar prices.

The quota is in addition to 2.16 lakh tonnes of levy sugar for sale through the public distribution system in November, taking sugar available in November to 1.51 million tonnes. Sugar availability in October-December 2004 would be about four million tonnes.

The government said it would release more sugar if required.