India may extend duty-free sugar import policy-trade

NEW DELHI - India is likely to allow mills to import duty-free raw sugar next year as stocks at the beginning of the new season in October would have dropped to a third from a year ago, a top industry official said.

Facing a sharp fall in output, India, the world's biggest sugar consumer, last month allowed firms to import duty-free raws up to September 2009 provided mills export an equal quantity of whites within 36 months.

"Raw sugar imports at zero duty should be extended to next year and we believe it will be," the president of the Indian Sugar Mills Association, Samir Somaiya, told reporters on Monday.

India was expected to produce 15.5 million tonnes in 2008/09, he said, revising his estimate last week of 16 million tonnes.

Production would rise next year, but would still be well below last year's output of 26.5 million tonnes, said Somaiya, who heads the body of private sugar producers.

"With the increase in prices, farmers are getting good price signals. We can say production will be 20 million tonnes next year," he said.

Sugar prices in India, the world's second-biggest producer after Brazil, have leapt to 1,987 rupees ($39.39) per 100 kg from 1,680 rupees six to seven months ago, traders say.

Sugar in the physical markets of Maharashtra, the top producer, has retreated 8.8 percent from a Feb. 3 high of 2,181 rupees, a record in 2009.

On March 12, the government imposed limits on stocks that can be held by traders to rein in prices ahead of an election in April and May.

Steps to keep prices artificially low would hit cane farmers and drag production down in the years to come when consumption was high, Shanti Lal Jain, director general of the Indian Sugar Mills Association, said.

"Prices have collapsed despite the fact production looks to fall drastically. This defies logic. If we try to look across the globe, sugar is cheapest in India," Jain said.

Cost of sugar production was 2,300 rupees per 100 kg, said Vivek Saraogi, managing director of Balrampur Chini Mills Ltd, the country's second-biggest producer.

He said retail prices less than 2,500-2,600 per 100 kg would hurt the financial health of producers and farmers would not get good returns for their produce.

source: reuters