Indian raw sugar imports -trade due to policy fears

NEW DELHI, - After importing 1 million tonnes of raw sugar, buyers in India, the world's top consumer of the sweetener, have cut purchases in the past two weeks as refiners fear the government could force them to sell 10 percent of their output below cost, trade officials said.

The government buys 10 percent of the domestic output at nearly half the cost of production and sells the "levy sugar" at low rates to the poor, and decides how much of the remaining 90 percent can be sold in the market in a particular period.

"I believe mills earlier did not realise that even the imported raw sugar would have to be sold to the government at a much cheaper rate. I have seen the rules. Imported sugar is not exempted," a top industry official said.

"Why will mills import if they are forced to sell 10 percent of their product?" he asked. "It is bizarre. The government may realise this and change the rule."

Imports of raws may slow further unless the government relaxes the rule for imported raws, said an executive at the Indian arm of an international trading firm directly involved in importing raws.

Indian mills, allowed to import tax-free raws on Feb. 17, have bought 996,449 tonnes, with the country's biggest refiner, Shree Renuka Sugars Ltd (SRES.BO: Quote, Profile, Research), having bought 625,640 tonnes, or 63 percent, import data available to Reuters showed.

Major suppliers to Indian mills include Louis Dreyfus, ED & F Man, Bunge and Cargill. For a related factbox, see [ID:nDEL500724].

Apart from allowing duty-free import of raws, India has also authorised state-run trading firms and a top farmers' cooperative to import up to one million tonnes of white sugar before Aug. 1 [ID:nSP496577]

India had to open imports of both raws and whites after trade officials cut output estimates to 14.5 million tonnes in the year to September, down 45 percent from 26.5 million a year ago.

Traders say government-owned trading firms have been going slow on imports of whites as this would become attractive if domestic prices were to rise further.

source: reuters