India May Raise Sugar Sale Price by as Much as 10 Percent

(Bloomberg) -- India, which vies with Brazil as the top sugar producer, may raise the minimum selling price of the sweetener by as much as 10 percent to help mills pay farmers on time, according to a government official Wednesday.

The factory-gate selling price for millers may be increased to as much as 32 rupees (45 cents) per kilogram from 29 rupees at present, said the official, who asked not to be identified as the information isn’t public. The government may announce the increase by Thursday, the official told reporters. A food ministry spokeswoman declined to comment on the matter.

A rise in the state-controlled price may prompt millers to sell more locally and reduce exports, supporting the global market. Sugar stockpiles in India, where production is set to exceed local demand for a second year, almost doubled to 15.4 million metric tons as of Dec. 31 from a year earlier following bumper output, according to Indian Sugar Mills Association data.

“Local prices have been rising because of the rumor, and we are concerned that it might hurt exports,” says Praful Vithalani, chairman of the All India Sugar Trade Association. Benchmark sugar prices for immediate delivery in Maharashtra climbed as much as 0.7 percent from a day earlier to 30 rupees per kilogram on Wednesday, he said.

Cane Arrears

The plan is also expected to help millers, who are under pressure to clear dues to cane growers. Mills owed 200 billion rupees to farmers as of Jan. 31, according to ISMA. Timely payments will encourage farmers to expand the area under sugarcane and prevent them from switching to other crops.

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 costs, according to the millers group.

India’s sugar production is likely to drop to 30.7 million tons this year from an all-time high of about 32.5 million tons estimated for 2017-18, according to the sugar group.

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, James Poole

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