Mumbai, July 1 - The Indian sugar industry expects the government to extend its duty-free raw sugar import policy by one more year to encourage overseas purchases and curb domestic prices in the year of tight supplies.
The government, earlier this year, removed the export obligation that was linked to the import raw of sugar, as tight supplies threatened to push up prices, stoking inflation. The policy is in effect until Aug. 1, the government had said.
"We are expecting government to extend this raw sugar import policy. This will help in augmenting domestic availability and controlling prices," Prakash Naiknavare, managing director of the Maharashtra State Co-operative Sugar Factories Federation Ltd, told Reuters.
India, the biggest sugar consumer in the world, has turned a net importer in 2008/09 due to a sharp drop in the output that traders estimate will fall by 45 percent to 14.7 million tonnes.
Mills were earlier allowed to source raw sugar from overseas at zero duty but had to export the same amount of refined sugar within three years, a move designed to keep a rein on imports, which the government withdrew recently.
"I think it is (extension of duty free policy) required for one more year. We are expecting that," said Narendra Murkumbi, managing director of Shree Renuka Sugars , India's largest sugar refiner.
India's sugar output in 2009/10 is expected to reach 17.5-18.5 million tonnes, lower than the previously estimated 20 million tonnes, on delay in progress of monsoon, a senior industry official said last week. See [ID:nBOM514435]
Domestic demand is pegged at 22.5 million tonnes.
The country has contracted to import around 3 million tonnes of raws, S.L Jain, director-general of the Indian Sugar Mills Association, said last month.
To boost supplies quickly, India also asked three state-run firms to import up to 1 million tonnes of duty free white sugar, but higher international prices thwarted its efforts, with only 25,000-30,000 tonnes so far landing in the country.
In New York, ICE October raw sugar futures <SBV9>, the market's most actively traded contract, hit the three-year peak of 18.09 cents per lb this week on hopes India may import more raws in coming months due to the poor crop.
India's sugar stocks at the start of the new season on Oct. 1 are estimated at 5 million tonnes, including imported raw sugar. Stocks are sharply down compared to 10 million tonnes at the beginning of the current sugar year in October 2008.
Analysts said any delay in extending the policy may result in raw sugar not landing in time for mills to refine the produce.
"If imports have to come in peak of crushing season, say in January, it should be contracted in August-September," said Ashwini Bansod, a senior analyst at MF Global Commodities India Ltd.
Indian millers prefer refining imported raws during crushing season as they get bagasse, waste fibre from the cane crop, to power the mills. Refining raws after crushing season is not a viable for Indian millers.