By Pratik Parija
May 20 (Bloomberg) -- India, the world’s biggest consumer of sugar, may increase the price of cane it pays farmers by 33 percent to increase plantings and stem a decline in production of the sweetener, a government official said.
The food ministry may recommend to the cabinet a price of 107.76 rupees for 100 kilograms (220 pounds), compared with 81.18 rupees paid a year ago, said the official, who didn’t want to be identified because the information isn’t public.
A decline in sugar production for a second year has forced the South Asian country to become a net importer for the first time since 2006, and fueled a 31 percent rally this year in raw- sugar prices. Worldwide demand may exceed output by 12.3 million tons in the year ending Aug. 31, according to Barclays Capital.
The proposal comes as the Congress party returned to power with its allies in elections that ended May 16, winning 21 seats in Uttar Pradesh, India’s biggest sugar cane producer, compared with nine in 2004. The country’s 50 million sugar cane farmers, a powerful voting block, shifted to grains and oilseeds last year because of a delay in payments by mills.
India’s sugar output is forecast to drop to 14.7 million tons in the year ending Sept. 30, the second year of decline. Cane production may be 289.2 million tons, down from a February estimate of 290.45 million tons, the farm ministry said May 12.
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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