India's sugar production and consumption are broadly expected to be in surplus for the 2011-12 crop year, but there are already fears of a collapse in production in 2012-13," Jonathan Kingsman said in a statement.

Kingsman's comments came ahead of the 3rd Indian Sugar Summit, being organised by the Switzerland-based Kingsman Group in New Delhi between Sept. 5 and Sept. 7.

Sugar production in India usually follows a two-year cycle of surplus and deficit as farmers shift to other crops due to price fluctuations.

The country had to import sugar for two straight years from 2008-09 after output fell below demand. The trend reversed in 2010-11 when output exceeded local requirements, leaving room for the government to allow exports.

India's sugar output is estimated to jump to 24.2 million tons this crop year through September, while it may rise to more than 26 million tons next year, according to industry estimates. The country's annual sugar demand is pegged between 21.0 million-21.5 million tons.

The Indian government should take advantage of these two years of surpluses to remove some of the constraints on the sugar industry and, in the process, even out the production cycle," Kingsman said.

India's roller coaster ride in sugar production over the past few years has led to major swings in world sugar prices, he added.

Sugar is the most regulated agricultural commodity in India. Mills not only have to follow the government's monthly release mechanism to sell sugar locally, but also supply a fixed portion of their output at below the market price for state-run welfare schemes.

The industry has recently resumed its demand for the removal of the decades-old government control on the sugar sector as supplies are comfortable.

source: menafn


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