Chandigarh, August 15
Sugar prices across the country have hit the roof. Retail price of sugar has touched an all-time high of Rs 35 per kg since yesterday. In the past one month, the sugar prices have gone up by Rs 8 a kg. - from Rs 27 a kg to Rs 34-35 a kg. Even the wholesale prices have gone up from Rs 25 a kg in July to Rs 32 a kg.

Wholesale dealers and traders rue that they expected sugar prices to reach such a high during Diwali, but the prices have already increased by 25 per cent this month. With the festival season approaching, the prices are expected to go up further.

Though the government had tried to stem the price hike by banning futures trading in sugar in May this year, the move does not seem to have had much impact on controlling the price rise. This is mainly because of a six million tonne production shortfall in sugar expected during this year.

As against a consumption requirement of 23 million tonne, the total sugar output in the country is likely to be around 17 million tonne. With the area under sugarcane being diverted for wheat and paddy cultivation (because of the high minimum support price offered for these), sugar production has taken a hit for a second consecutive year. In areas, where sugarcane is cultivated, drought-like conditions are adversely affecting the sucrose content, thus bringing down sugar production.

Sources told the TNS that the government had allocated less sugar (16.50 lakh tonnes) for sale in the market, which has contributed to a sharp price rise. Since the buffer stocks held by the government are fast depleting, it is giving rise to speculation that demand cannot be met.

Though the government has initiated steps to increase the domestic supply by importing raw sugar and imposing stock limits on sugar manufacturers and traders to prevent hoarding, it has so far failed to bring down the sugar prices.

Interestingly, this production shortfall in sugar is not just driving up the prices in the domestic market, but also the prices in the global market. With large area under sugarcane production in Brazil, which is the largest sugar producer in the world, having been diverted to bio fuel cultivation, a global deficit of 3.5 million tonne is projected for 2008-09.

Also, excess rainfall in Brazil is adversely affecting the sugarcane crop there. The decline in area under sugarcane cultivation in India has only aggravated the global shortfall in sugar production as the country is the second largest producer of sugar.