India to Increase Minimum Sale Price of Sugar: Official

(Bloomberg) -- The Indian government may raise the minimum selling price of sugar by as much as 10 percent, a government official told reporters in New Delhi on Wednesday.

• The factory-gate price at which millers sell the sweetener may be increased to as much as 32 rupees ($0.45) per kilogram from 29 rupees at present, said the official, who asked not to be named as the information isn’t public. The government may announce the increase by Thursday, the official said. A food ministry spokeswomen declined to comment on the matter.

Key Insights:

• An increase in the state-controlled price will prompt millers to sell more in the domestic market and potentially reduce exports, supporting global prices.
• It will also help millers, who are under pressure to clear dues of cane growers. Mills owed 200 billion rupees to cane farmers as of Jan. 31, according to the Indian Sugar Mills Association.
• Timely payments may encourage farmers to expand the area under sugarcane and prevent them to switch to other crops

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• The sugar association has asked the government to increase the minimum sale price to 35-36 rupees a kilogram.
• The current factory-gate prices are about 5-6 rupees per kilogram below the output cost, according to the millers group.
• Sugar futures on the National Commodity & Derivatives Exchange climbed 0.4 percent to 3,029 rupees per 100 kilograms.

To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Atul Prakash, Abhay Singh

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