New Delhi, Jan. 10 - India's sugar production in the crop marketing year that started in October might remain flat on the year or drop marginally because of lower yields in key growing provinces, a senior government official said Thursday.
In 2006-07, India produced around 28 million metric tons of sugar.
"Earlier, we were estimating sugar production to be at least 5%-10% more than last year, but have now scaled down the estimate after getting reports from various provinces," the official who didn't wish to be identified said.
This is the first time a top official of India's food ministry has accepted that sugar production might be lower than estimates.
Sugar prices in India have risen in the last few days over talk that production might be less than earlier estimates because of low yields and a delay in crushing in some provinces.
"Traders are now talking of sugar production being even at around 26 million tons," Vinay Kumar, managing director of National Federation of Cooperative Sugar Factories said.
However, the government official said it is too early to project a sharp fall in output.
"We have to keep a watch on sugar crushing by mills in southern India as their output will be come later," the official said.
Though production is estimated to be below 28 million tons, there won't be a significant fall in the surplus, he said.
"If we estimate demand to be around 20 million tons in 2007-08, the surplus will still be around 5 million tons excluding 3 million tons of exports," the official said. "This number is substantial to take care of any shortage when added to the carryover stocks of 5 million tons."
The official also said that the government is confident that exports in 2007-08 financial year might exceed the government's target of 3 million tons.
"Already we have exported more than 2 million tons of sugar this fiscal, so exporting another 1 million in the remaining few months is no big deal," the official said.
In April the federal government announced freight incentives for sugar mills to boost exports.
The incentives remain valid until April 2008. The government has in principle agreed to extend the validity period of exports beyond April 1, but hasn't made a definitive decision yet.