Oct 23, 2012 08:26 AM EDT
India Sees Good Sugar Output, Import Duty Hike Likely

India will be seeing a surplus in its sugar production, which will be exported soon, Food Minister K.V. Thomas said, according to Reuters.

As per forecasts, India has been seeing a good sugar output of around 24.5 million tonnes in the marketing year, which started Oct. 1, the report adds. This will leave a surplus of 2.5 million tonnes to be exported.

"We are likely to produce enough sugar to meet demand and perhaps will have a small quantity of exportable surplus," said Thomas, according to Reuters.

The country has been on the verge of banning exports of sugar and some food grains, due to less-than-ideal weather. But thanks to a better-than-average monsoon, sugarcane plantations and farms have revived. However, some areas with sugarcane plantations did not receive the requisite amount of rain, resulting in the decrease of sugar output compared to last year's 26 million tonnes, reports Reuters.

Moreover, a higher price for sugar in the domestic market may also discourage traders from exporting sugar, the report adds. But, the government is likely to step in and ensure that traders get a good price for their sugar.

However, the demand for India's sugar does not match the supply. While KV Thomas has been doing his best to increase supply, the domestic demand has dropped.

Thomas is also considering a hike in the import duty of raw sugar.

"There are different proposals before us. One is to increase import duty on white sugar to 20%. The other one is to bring down import duty on raw sugars to zero. We are examining these proposals," Thomas told reporters, according to the Business Standard.

India a Major Player in Global Food Trade

According to the Wall Street Journal, India has been playing a key role in the global food trade this year. Since the drought in the U.S. farm belt severely curbed exports from the country, and a prolonged dry spell in the Black Sea Grain region lowered food grain output from Russia and Ukraine, India has become a major exporter of several food grains, including rice and wheat.

After India lifted an export ban on rice and wheat, several South East Asian countries have been buying rice and wheat from the country. India is even likely to become the top exporter of rice, displacing Thailand. Thailand's rice-pledging scheme and stockpile building has seen a rise in the price of rice, and a decline in the buying of Thai rice in the global market. However, India stepping into Thailand's shoes has brought the prices down once again, reports Wall Street Journal.

"In the rice market, India saved the world from a cardiac arrest," said Tejinder Narang, an adviser at Emmsons International, a New Delhi-based commodity trading company, according to WSJ.

Soy and wheat exports are also likely to see a rise in the next marketing year.

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