Centre mulls hike in sugar buffer on high output cues

With the country's sugar production in the 2006-07 (October-September) season likely to cross 27 million tonnes against the earlier estimate of 26 million tonnes, the government is actively considering creation of an additional sugar buffer stock of 3 million tonnes. This will be over and above the 2 million tonnes buffer stock created in March.

"The food ministry has given an in-principle approval for the creation of an additional buffer stock and it will be shortly send for consideration to the Union Cabinet," said a senior industry official.

The sugar will physically remain with the companies. The purpose behind the buffer stock will be to transfer the cost of carrying the commodity from the companies to the government.

Initially when the government decided to create a 2-million tonne buffer stock in March, the official official estimate of sugar production for 2006-07 (October-September) season was only 22.7 million tonnes.

However, with Maharashtra and Uttar Pradesh making an upward revision in sugar output estimates, a need to increase the buffer stock was felt. The country has already produced 25 million tonnes of sugar by April.

"The current season is likely to end with a production of about 27 million tonnes against last season's 19.2 million tonnes and a consumption demand of 19 million tonnes," said Vinay Kumar, managing director of National Federation of Cooperative Sugar Factories.

The creation of a 5-million tonne buffer stock will provide some relief to sugar mills, which are incurring heavy losses owing to high production costs, said an executive of a leading sugar company.

According to the international sugar organisation, the size of the projected global surplus in 2006-07 has increased to record 9.115 million tonnes against 7.2 million tonnes projected in February primarily due to bumper crops in Brazil and India.

World sugar production has been revised upward by 2.418 million tonnes to a record 162.621 million tonnes.