Sugar prices hit six-year high in India

Why is this happening?

There are several factors that are driving the sugar prices up, such as:

•  *Limited rainfall* in key sugarcane growing regions, such as Maharashtra and Karnataka, which has affected the crop yield and quality .
•  *High demand* for sugar during the festive season, which starts from next month.
•  *Low supply* of sugar in the domestic market, as the government has restricted exports to 6.1 million metric tons in the current season.
•  *High global prices* of sugar, which have surged above $500 per metric ton for the first time since 2011.

How is the rising of sugar prices affecting the consumers and the industry?

The rising sugar prices have put a burden on the consumers, especially the low-income groups, who spend a large portion of their income on food items. The consumers are also facing inflationary pressures from other commodities, such as edible oils, pulses and cereals.

The sugar industry, on the other hand, is facing a liquidity crunch, as it has to pay higher prices for sugarcane to the farmers, while its revenues are capped by the government’s control over retail prices. The industry also owes about Rs 22,000 crore to the farmers as arrears for the previous season.

What is the government doing about suger prices hiking ?

The government has assured that there are sufficient stocks to meet the domestic demand and has not announced any measures to curb the price rise so far. However, some experts have suggested that the government should:

•  *Increase the minimum selling price* of sugar from Rs 31 per kg to Rs 34 per kg, which would help the industry to clear its dues to the farmers and improve its profitability.
•  *Allow more exports* of sugar to take advantage of the high global prices and reduce the surplus in the domestic market.
•  *Reduce the import duty* on raw sugar from 40% to 15%, which would enable the mills to import cheaper raw sugar and process it into refined sugar.
•  *Provide subsidies* to the consumers, especially the poor and vulnerable sections, who are bearing the brunt of the price rise.

What is the outlook for the future?

The sugar prices are expected to remain firm in the near term, as the demand-supply gap is likely to persist until the next crushing season begins in October-November. The monsoon rainfall in August-September will also play a crucial role in determining the crop prospects for the next season. However, in the long term, the sugar prices may moderate, as India is expected to produce a record 32.5 million metric tons of sugar in 2023-24, which would create a huge surplus in the domestic market and lower the global prices.