India should stop exporting sugar: HSBC

Says in long term India's internal sugar consumption will be equal to its production capacity

India should stop exporting sugar as in the long term production is likely to match domestic demand, and its output cost is already higher compared to other countries, a HSBC survey has said.

Titled 'Global Agricultural Commodities', the survey has said that Brazil is the lowest cost producer of sugar at $17 per pound and the cost in India is almost 40% higher than that. As a result, Brazilian exports of sugar have soared in the last two decades.

"In long term, India should stop exporting. In our long term projections, we believe India's internal sugar consumption will be equal to its production capacity." the survey said.

Historically, sugar production in India had been the determining factor for global sugar prices which is not the case now, it said.

The survey added: "When prices go up, farmers would plant sugarcane, and India would switch from a net importer to a net exporter. A collapse in sugar prices, caused by the switch to exports, would pressure the margins of millers and eventually to delay payments to farmers. The farmers in turn switch to other crops forcing India to switch back to being importer of sugar."

It pointed out that there will be a further fall in the sugar production in the country, as several mills have been operating with very low to negative margins, and the levels of arrears to farmers is reaching historic highs.