The Story Of Sweet’n High

Poor planning has caused a peculiar sugar crisis just around the festive season, says VEESHAL BAKSHI

Poor crop India’s sugar output could drop to 15 million tonnes in the crop year ending next month Photo: AP

IT WAS tea, as usual. Except that it wasn’t quite the usual taste of tea. At the Communist Party of India- Marxist (CPM) press conference on the issue of food security a few days ago, journalists were served tea, but after complaints it wasn’t sweet enough, the staff arranged for extra sugar.

But it was an apt absence: during the conference, politburo member Brinda Karat spent time on the sky-rocketing sugar prices, saying it had become unaffordable for the common man. She added that some “big companies had made a killing” and the stock prices of major sugar companies were doing “very well”, despite the recession.

She also indicated that a major “sugar scandal” was in the making and said a detailed study on the government’s sugar policy was needed. At the end of the briefing, when a journalist asked Karat if she had drunk a cup of tea, she promptly quipped, “Yes, but without sugar!” And added: “Given the sugar prices, everyone in India will have to start behaving like diabetic patients.”

Everyone present in the room agreed with her. It’s true that sugar prices have risen from Rs 14 per kg in 2004 to well over Rs 30 per kg now. And if trade experts are to be believed, sugar prices in the retail market will soon be Rs 34-35 per kg. Sugar industry insiders blame poor planning and utter lack of foresight in the government for this.

Till September 2008, raw sugar and refined sugar exports were allowed freely. This was despite the fact that industry pundits had already begun then to predict a global shortage of sugar.

By the time the government pressed the panic button last week the situation had spiraled out of control: India’s sugar output is expected to drop by more than 40 percent to around 15 million tonnes in the crop year that ends September 2009. This can be translated into a shortfall of about 5 million tonnes.

In reaction to rising prices and lower stocks, the government has now put curbs on bulk buyers by directing them to keep a maximum of 15 days’ stock, say traders. Surprisingly, however, the government has not reigned in sugar mills and large trading houses (including some multinational corporations – informed sources say that sugar mills and trading companies have imported huge quantities of raw and refined sugar over the last few months and stored them in bonded warehouses.

This, in turn, has led to a peculiar crisis: an artificial shortage in the international market, pushing up prices further. The international price of sugar is Rs 26,000-26,500 per tonne (landed cost in India).

AS THE price of sugar began rising in the domestic market as well, these players off-loaded restricted quantities, making a huge killing. For domestically produced sugar, the ex-factory price of refined sugar is about Rs 30,000 per tonne. Add to this excise duty of Rs 1,000 per tonne and the profit margins of wholesalers and retailers, and a price of Rs 34,000 per tonne (or Rs 34 per kg) is what it works out to be.

Industry experts also say that the government should actually extend the stock limits imposed on bulk buyers to sugar mills as well to all importers of raw and refined sugar. As demand peaks over the coming festival season, unless strict action is taken against hoarding, Rs 34- 35 per kg is what people will have to shell out for a little sweetness.