Sugar buffer stock raised by 3 million tonnes

CABINET DECIDES

Union Finance Minister P Chidambaram today said the Cabinet had decided to create an additional sugar buffer stock of 3 million tonnes at a cost of Rs 590 crore for one year.

In March, the government had announced creation of 2 million tonnes buffer stock. With today's decision, the total sugar buffer stock will be 5 million tonnes. The money for buffer stock will come from the Sugar Development Fund.

"This is a step in the right direction. The decision will defray part of the carrying cost that the industry is incurring due to a bumper sugar production," said Vivek Saraogi, managing director, Balrampur Chini Mills.

"Sugar prices should recover marginally due to the decision on buffer stock and help mills to clear cane arrears," said Vinay Kumar, managing director, National Federation of Cooperative Sugar Factories.

The decision has come in the wake of a higher than expected sugar production in the country.

As on June 15, the country had produced 27.3 million tonnes sugar and is expected to produce a record 28 million tonne sugar in the 2006-07 season (October-September), about 45 per cent more than the 19.2 million tonnes produced in 2005-06. Sugar consumption continues to remain at 19-19.5 million tonnes.

Due to a bumper production, sugar prices have crashed by about 35 per cent since last year.