As sugar stockpile grows, India needs sugar reforms, says industry body ISMA

India’s sugar sector is in urgent of reform as stocks climb and high cane prices keep production costs far above those of its rivals, the Indian Sugar Mills Association (ISMA) said.

“We would ideally like to carry over a stockpile about 4.5 million tonnes. It would suggest that India should be in the international (export) market in the year 2019/20, even if there is talk of lower sugar production in India because of other issues,” ISMA’s Director General Abinash Verma was reported as saying at a conference organised by the International Sugar Organization in London.

The average price of cane in India was $42.30 per tonne in the 2017/18 season, compared with $24.06 in Australia, $25.11 in Brazil and $27.45 in Thailand. Among all the large sugar producers around the world, India is paying the highest sugar cane price to farmers.

India’s government need to set a minimum price that mills must pay for cane at a level that makes it much more attractive for farmers to grow than many other crops, ISMA director general said.

India’s sugar stocks were expected to rise during the 2018/19 season despite an expected dip in production to 31.5 million tonnes from the previous season’s 32.5 million tonnes.

Indian Sugar consumption should be 26 million tonnes and there is an export target of 5 million, indicating a build in stocks to 11.2 million tonnes from 10.7 million tonnes.

Verma said the Indian government needs to stop fixing the cane price and allow the country to move to a system such as revenue sharing between mills and farmers, otherwise there would continue to be surplus cane and surplus sugar.

“Sugar reform in India is not only a need now, it is an urgent need, it is almost a compulsion. We need to move ahead,” he said. Verma said reforms would, however, encounter political opposition because sugar cane farmers who benefit from the current system represent a key voting bloc in many parts of the country.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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