India is considering measures to bolster sugar supplies and rein in record prices, such as limited duty-free imports and curbs on the amount of stocks held by bulk traders, potentially allowing in overseas shipments for the first time in nearly a decade.
Imports by India, the world's biggest sugar consumer, could support benchmark prices in London and New York , while helping New Delhi rein in domestic prices during the August to November festival season when demand rises.
"Since there has been a completely unwarranted increase in prices, we will have to take measures to check prices, and we are considering a whole host of measures and tools," said a government source who spoke on condition of anonymity, citing official rules.
Measures being discussed include lowering the amount of stockholdings, allowing limited imports, cutting import duties and adjusting monthly sugar allocations for domestic sales by mills, he said.
Wholesale sugar prices in Kolhapur, a key trading hub in the western state of Maharashtra, have risen nearly a fifth since the start of August to a record 5,350 rupees ($56) per 100 kg.
The increase comes despite sufficient supplies to meet domestic demand until next season's arrivals start coming into the market, a second government source said.
"Local supplies are tight. Only imports can help increase supplies and bring down prices during the festival season," said Ashok Jain, president of the Bombay Sugar Merchants Association.
MILLS COULD IMPORT 1 MILLION TONS OF SUGAR
India's sugar demand typically rises from August to November when it holds major festivals such as Ganesh Chaturthi, Dussehra and Diwali, when consumption of traditional sweets and confectionery increases.
Last week, Reuters reported that India was considering curbing the amount of sugarcane used to produce ethanol in the season beginning in October to boost sugar output and tame high prices.
The government could ask mills to import 1 million metric tons of sugar duty-free before the end of October, as new-season supplies start trickling in by November when cane crushing gathers pace, said a Mumbai-based dealer with a global trade house, who declined to be named because he was not authorised to speak to the media.
"Mills will try to import only raw sugar, as white sugar prices are very high and there is hardly any margin in importing white sugar," the dealer said.
India has a handful of port-based sugar refineries that are allowed to import raw sugar duty-free on the condition that they export an equivalent volume of refined sugar.
The government could also ask these refineries to divert some of their stocks to the domestic market, potentially releasing about 300,000 tons of sugar locally, said a New Delhi-based dealer who also spoke on condition of anonymity.
