Indian Mills Seek to Import Raw Sugar as Output Drops

By Thomas Kutty Abraham

Dec. 11 (Bloomberg) -- Sugar mills in Maharashtra, India’s biggest producer, plan to import at least 1 million metric tons of raw sugar as a reduction in crop area cuts sugar cane output.

Mills have sought government permission to buy raw sugar from countries including Brazil, Prakash Naiknavare, managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd., said in an interview. The purchases are the nation’s first in almost three years.

“There will hopefully be a positive decision by the end of this month,” said Naiknavare. “We have received an encouraging response from the government.”

Imports by India, the world’s biggest consumer, may worsen a global shortage and add to the past year’s 15 percent gain in raw sugar prices in New York. Global sugar supply will be 5.8 million tons short of demand in the 2008-09 season as tightening credit spur mills to restrain output, according to Czarnikow Group Ltd.

Maharashtra State Cooperative, a group of 190 mills in the western Indian state, wants the government to permit imports on the so-called ton-to-ton basis, as against the grain-to-grain, which requires producers to re-export raw sugar after processing.

“We should be able to re-export the imported sugar after two years, when the country is expected to be in surplus again,” Naiknavare said.

Crushing Delayed

India’s output may drop 26 percent to less than 19.5 million tons this year after farmers in the biggest cane-growing states delayed crushing, according to the Indian Sugar Mills Association.

Sugar cane production may fall to 294.66 million tons in the year ending June 30, 13.5 percent less than last year, as farmers shifted acreages to more profitable crops, the farm ministry said.

“Recovery is less than last year because of heavy rain at key sucrose-setting stages,” said Naiknavare. Maharashtra output may drop 38 percent to 5.6 million tons, he said.

Sugar production fell 21 percent to 1.4 million tons in the first two months of the crop year that began Oct. 1 from a year ago, Vinay Kumar, managing director of the National Federation of Cooperative Sugar Factories Ltd., said Dec. 8.

To contact the reporter on this story: Thomas Kutty Abraham in Mumbai at tabraham4@bloomberg.net