Sugar futures may resume from Oct

The government would review the ban on futures trade in sugar in the first week of September after assessing the status of the sugarcane crop, Agriculture Minister Sharad Pawar said today.

“In order to allow futures trade in sugar, I will have to first assess the plantings of sugarcane...We will be able to take an informed view in the first week of September,” Pawar told reporters.

The government had banned futures trading in sugar in May 2009 amid concerns of a shortfall in output and a rise in prices. The ban was initially clamped for seven months and later extended until September 30 this year.

Commodity market regulator Forward Markets Commission has said it may lift the suspension on futures trade in the commodity from the next season that starts October 1 if production is good.

The industry expects sugar production at around 24-25 million tonnes in the new season, higher than the estimated demand of 23 mt and much higher than this year’s production estimate of 18.8 mt.

The sugar industry has been seeking easing of controls on the sector since output is expected to be good and prices of the sweetener are ruling low. It has also been asking for imposition of customs duty on both raw and white sugar to check cheaper imports. Pawar today said re-export of sugar, imported by mills under the advance licensing scheme, is proceeding smoothly.

“Sugar re-export under advance licensing scheme is progressing smoothly, I don’t think there are any concerns,” Pawar said. The government, faced with a shortage, had four years ago allowed duty-free import of raw sugar under the obligation to re-export a similar quantity after refining. More than 700,000 tonnes of sugar is still to be re-exported under the scheme, according to industry officials.

Officials said this week, after a gap of two years, the sugar directorate has decided to issue export licences to some mills as well as trading firms whose imported consignments are stuck at western and southern ports. Licences were being issued on the condition that exporters import an equivalent quantity of raw sugar within four months.

The government had last week permitted domestic sugar companies to export around 200,000 tonnes imported sugar that was stuck at ports due to paucity of railway wagons for transportation.

Taking advantage of duty-free imports allowed by the government, Indian sugar mills imported considerable amount of raw and white sugar last year when domestic prices were ruling much higher than global rates. Domestic prices have since slumped to Rs 25 a kg from record highs of around Rs 46 a kg in January. Asked about the prospects of kharif paddy output, Pawar said he did not see any drop in production because of poor rains in eastern and northeastern India, which predominantly grow paddy.

“Situation is not so good in Bihar, Jharkhand and five districts of West Bengal, but so far our view is that there will not be any drop in paddy output. Paddy sowing is possible up to end of August,” Pawar said.

He said this year paddy has been sown over 27.4 million hectares compared with 25.1 million hectares at the same time last year.