Deficient rains push sugar prices to six-year high

September 6, 2023
Hindustan Times |

The country’s annual consumption of the sweetener is about 27 million tonne. The government said it is set to bring out official estimates of sugar production.

Sugar prices rose to a six-year high on Tuesday, amid concerns over a deficient monsoon, but the government has maintained that there are sufficient stocks to meet demand during a festive season beginning next month, when demand soars.

If India ends up with a smaller crop due to scanty rainfall in key producer states, such as Maharashtra and Karnataka, the government may ban export of the sweetener in the new season beginning October 1.

High inflation is currently a pressing concern in the world’s second-largest sugar producer, with consumer inflation accelerating to 7.44% in July, a 15-month high, led by food prices.

Elevated prices have prompted India to ban rice and wheat shipments abroad, levy a 40% duty on onion export and allow duty-free imports of pulses. Poor rains led to projections about lower cane output by the Indian Sugar Mills’ Association last month.

On Tuesday, wholesale sugar prices touched ₹37,750 a tonne, an increase of about 2.9% in a fortnight, highest since 2017, industry data showed. In the current season, India had limited sugar export to 6.1 million tonne, against 11.1 million tonne exported in the previous said.

India is the world’s biggest consumer of sugar, which is tightly regulated by the government. The sweetener is considered an essential item because people are sensitive to its prices. Yet, a major chunk of India’s annual sugar output goes into commercial food products. Household consumption accounts for no more than 10%.

The government last month said although rains had been patchy, cane crop in the country was in a “reasonable condition”, disagreeing with private projections of a fall in output as “premature”.

In fact, as on September 1, overall cane acreage stood at 5.9 million hectares, marginally higher than 5.5 million hectares in the previous year.

“The country currently has 10.8 million tonnes of sugar. This quantity is sufficient to meet current demand and also demand during the festive season. The present availability is higher than needed,” Union food secretary Sanjeev Chopra had then said.

The country’s annual consumption of the sweetener is about 27 million tonne. The government said it is set to bring out official estimates of sugar production soon.

Under a government-mandated programme, a surplus part of the sugarcane crop is utilised to make ethanol, which is blended with petrol by oil-marketing companies. Ethanol can also be made with cereals, such as rice and maize.

This year, more sugarcane may be required to be diverted for ethanol-making due high cereal prices and concerns of lower yield due to a poor monsoon. The Union government last month decided to stop the sale of surplus state-owned rice for ethanol-making, mainly to bolster food security.

According to India’s fuel-blending programme for the E20 target, 5.5 billion litres of ethanol are to come from sugarcane and rest 4.6 billion litres from grains, totalling 10.1 billion litres of ethanol required to meet the target.