(Corrects Mumbai price in fifth paragraph.)
India, the world’s biggest sugar consumer, has increased imports as refiners seek to profit from a slump in global prices to the lowest level in more than two years, according to a producers’ group.
Overseas purchases of raw sugar for re-export and sale in the local market have totaled 700,000 metric tons since Oct. 1, Abinash Verma, director general of the Indian Sugar Mills Association, said in an interview. That’s more than the combined imports in the previous two years, according to U.S. Department of Agriculture data. Imports will increase in the coming months if the government doesn’t raise taxes, Verma said.
Sugar is heading for the second annual loss in New York, after the highest price in three decades in February last year spurred farmers to plant more cane. Rising Indian imports may help stem the 17 percent decline in prices this year and trim a third global glut. The loss in sugar contrasts with 18 percent gain in soybeans, 23 percent advance in wheat and 5.4 percent increase in the S&P GSCI Agriculture Index of eight commodities.
“The Indian consumer is paying higher than the world price,” said Narendra Murkumbi, managing director of Shree Renuka Sugars Ltd. (SHRS), the country’s biggest refiner, which is processing imported raw sugar at its two refineries with a combined capacity of 1.7 million tons. “The Indian industry has become uncompetitive because of high cane costs.”
Futures slumped to 18.31 cents a pound on ICE Futures U.S on Dec. 13, the lowest price for a most-active contract since Aug. 12, 2010, and ended at 19.23 cents yesterday. The contract for delivery in January on the National Commodity & Derivatives Exchange Ltd. fell 0.4 percent to 3,255 rupees ($59.34) per 100 kilograms at 12:15 a.m. in Mumbai.
Sugar refined from the raw variety imported into Kandla, Haldia and Tamil Nadu ports costs about 32.5 rupees a kilogram, while mills in Uttar Pradesh spend 38 rupees and those in Maharashtra as much as 33 rupees, Verma said.
“When there is a surplus in the country, what is the need for imports?” said Vivek Saraogi, managing director of Balrampur Chini Mills Ltd. (BRCM), India’s second-biggest sugar maker. “Either imports should be banned or the duty should be hiked to 60 percent, otherwise you will be paying to Brazilian or Pakistani farmers instead of Indian farmers.”
Mills have petitioned the food ministry to raise the tax on imports of white and raw sugar to 60 percent from 10 percent to curb cheap inflows, Verma said. Mills are losing as much as 5 rupees on every kilogram (2.2 pounds) of sugar sold in the northern state of Uttar Pradesh, he said. The government will decide on the duty in the next 15 days, Food Minister K.V. Thomas said Dec. 13.
Production in the season that began Oct. 1 will probably total 24 million tons, exceeding annual demand of 22.5 million tons, according to the mills association. The nation had a stockpile of 6 million tons at the start of the 2012-2013 crop season, it said.
Mills in Uttar Pradesh, set to be India’s biggest sugar producer this year, may lose about 40 billion rupees in revenue in the year that began Oct. 1 as they sell the sweetener at below production costs after the state government raised cane prices by as much as 20 percent.
“If mills are unable to make money on sugar because of higher cane costs and cheaper imports, they will not be able to make payments to the farmers on time, which will impact planting next year,” Verma said.
India may become a net importer in 2013-2014 as production may fall about 10 percent, Shashidhar Payannavar, senior vice president at Agrocorp International Pte., said Dec. 18. World supplies may exceed demand by 10.98 million tons in the 2012- 2013 season, which began Oct. 1, 26 percent more than an August estimate, researcher Kingsman SA said Dec. 7. Morgan Stanley expects a 5.364 million-ton surplus.
“Imports are justified when there is a shortage,” Verma said. “India is producing more than its domestic requirement this year. There should not be any imports.”
To contact the reporters on this story: Pratik Parija in New Delhi at email@example.com; Prabhudatta Mishra in New Delhi at firstname.lastname@example.org
To contact the editor responsible for this story: James Poole at email@example.com