Rising demand makes India a sugar importer

by Dave

Commodities-Markets-The Economic Times

Sugar consumption [in India] has increased by two million tonnes in the past two years, pushing up the annual domestic consumption to about 23 mn tonnes from only 19 mn tonnes in 2005-06. Consumption is growing by over 4% annually, but the government prefers to keep tightlipped about it and pegs the annual sugar consumption at only 21 mn tonnes.

This means domestic consumption will surpass the projected output (22 mn tonnes at present) for the 2008-09 year, paving the way for sugar imports and sharpening domestic sugar prices for both industrial and retail consumers. Analysts have already projected that India will be a sugar importer from the 2009-10 sugar year.

In February this year, the core platform for private sector sugar units, the Indian Sugar Mills Association (ISMA), hiked its domestic consumption figures from 19 mn tonnes to 21 mn tonnes, against an overall production level of 28.4 mn tonnes. It also projected domestic sugar consumption levels for 2007-08 sugar year to at least 22.5 mn tonne, up from the official figure of 21 mn tonnes.

Keeping domestic sugar consumption level low would mean that the carryover stocks from last year would be lower by two million tonnes, at about 9 mn tonnes. Compared to the lower government figures, industry estimates for 2007-08 sugar year (Indian Sugar, September 2008) are that internal consumption was a whopping 22.5 mn tonnes (against production of 26.3 mn tonnes and availability, including carryover stocks, of 35.5 mn tonnes) compared to 21 mn tonnes in 2006-07 and 18.5 mn tonnes in 2005-06.

Ironically, most recent studies show that sugar consumption has gone up significantly on account of industry (such as ice creams, soft drinks, pastries, chocolates and the pharma sector).

The report also observed a fall in the share of expenditure on sugar in rural areas and a much higher increase in sugar expenditure in urban areas. And that was a whole decade or more from today, when the consumption of processed foods and soft drinks has more than doubled.

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