India sugar prices unlikely to see sharp rise in 2008/09

MUMBAI, Sept 19 (Reuters) - Indian sugar prices are unlikely to rise steeply despite a drop in output in the year ending September 2009 as millers are still holding stocks from the previous year, a senior industry official said on Friday.

"We are more or less in a balanced situation. One should not fear any steep rise taking place," S. L. Jain, secretary general, Indian Sugar Mills Association, told Reuters.

"Prices should remain steady in coming months," he added.

Sugar prices soared in August on expectations output in the year ending September 2009 may drop to about 20 million tonnes from about 27 million tonnes in the current year.

Spot prices in Maharashtra, country's largest producer, rose nearly 10 percent to 1,821 rupees per 100 kg in August.

After the rise, government, which controls the sector, asked millers to sell sugar from buffer stocks, taking total supplies for the month up to 2.1 million tonnes compared to just 1.3 million tonnes in the same month last year.

The millers, earlier this month requested the government to extend the period for sale of buffer sugar.

"The prices have come down. Now that the stability is there the government may think of extending the validity period so that proper pricing continues," Jain said.