New Delhi: As retail sugar prices surged 15% in one month on fears of poor monsoon, the food ministry is considering curbing exports of the sweetener to augment domestic supplies, official sources said on Tuesday.
In a status note to the Cabinet Committee on Economic Affairs, the food ministry will propose various options, including capping sugar exports under the open general licence at 1.5 million tonne and curbing wheat exports by private traders, to ensure steady domestic supplies of the key commodities, senior officials told FE.
However, any such plans by the food ministry will draw stiff resistance from agriculture minister Sharad Pawar, who has been maintaining the government need not curb exports of farm items, as domestic stocks have been adequate, and the farmer shouldn’t be asked to subsidise the consumer.
Prices of key farm commodities, especially sugar, started rising sharply since mid-June on fears that poor monsoon will hit summer-sown crops. Sugar prices hit an 18-month high in August on apprehension that dry spells in key producing regions of Maharashtra may hurt cane yield. Sugar prices are ruling around R40 a kg in Delhi and Mumbai, up 25% from a year before, according to official data.
Separately, the food ministry will also direct mills to sell an additional 4,20,000 tonne of sugar in the open market in August to curb the soaring prices, one of the official said.
Earlier, mills had been ordered to sell 4.5 million tonne of sugar for sale in the open market this quarter, and subsequently, the ministry had also asked them to offload 4,66,000 tonne over and above the quota to improve supplies.
The latest decision to offload more will take the mandatory sugar sales by mills in the open market to 5.38 million tonne this month.
India, the world’s second-largest grain grower, had lifted a four-year ban on wheat exports in September last year as inventories swelled following two successive years of bumper harvests. Traders have exported around 2 million tonne of wheat so far.
The country harvested a record 93.90 million tonne of wheat in the crop year through June.
Similarly, the world’s second-largest sugar producer had allowed shipments of two million tonne of the sweetener in the initial months of the marketing year through September, prior to freeing the shipment in May, to help mills clear payments to farmers for previous cane purchases.
The commerce ministry has already issued permits for exports of 1.48 million tonne of sugar under the open general licence, of which 8,60,000 tonne have been shipped out, said a senior sugar industry executive.
The Indian Sugar Mills Association (Isma) said any plan to curb exports “doesn’t make any sense” because, with domestic prices having risen recently, shipments of the sweetener isn’t viable now. Global sugar prices are ruling around $610 per tonne, around 6% lower than the domestic prices, according to the Isma data.
“There is surplus sugar in the country, and we expect 2012-13 to be another surplus year. So by curbing exports, the government will be signalling lack of adequate stocks in the country, which isn’t correct, and the market will only flare up after that,” Isma director general Abinash Verma said.
Verma said the country will end the current year with around one million to 1.5 million tonne of more stocks, compared with a year earlier. According to Isma, stocks by the end of 2010-11 were to the tune of 5.5 million tonne.
However, the premium white sugar commands over the raw variety in the global market has surged by 9.5% over the past two weeks on concerns India may curb exports because of rising domestic prices, according to Bloomberg. White, or refined sugar, was $121.51 a tonne more expensive than the raw sweetener in intraday trade, it said, adding the premium was $110.97 a tonne two weeks earlier.
India’s sugar output is estimated to have climbed 7% to 26 million tonne due to higher cane crushing, compared with the consumption of around 21.5 million tonne.
The government had permitted 1.5 million tonne under the open general licences last year in three equal tranches, starting April 2011, after a gap of two years when it faced a shortage.