The notion that high sugar prices could potentially damage the poll prospects of many politicians is obvious. So its no surprise to see politicians thinking to allow the import of white sugar at this eleventh hour. Although, the quantity to be imported is minimal - just 0.5 million tons - the decision is indeed positive.
However, one wonders what is all the long delay about, as the import recommendation still awaits governments approval and hence its materialization. Are the officials waiting for the imports to become unattractive which would create yet another sugar crisis in the country?
Whatever the reasons may be, it is a no brainer that importing it today would help ease sugar prices in the retail market by as much as 25 percent. The situation clearly defies the common notion of etter late than sorry, as in this case late imports would lead to a sorry situation and would be of no use.
The grave situation in the sugarcane market should be alarming enough for decision makers to be proactive, as sugarcane rates in the open market are touching the seventh sky - Rs220 per maund, from Rs120 per maund six months ago. Basic working shows that at this price, sugar production would cost Rs78//kg with retail prices potentially going beyond Rs80/kg.
The government must not turn its back to the global sugar demand-supply scenario, where heightened demand from China, Russia and Mexico is causing acute supply shortage, albeit, prices have tapered off a bit on account of arrivals from Brazilian fields.
Eyeing this invert market mechanism - a futures market where the nearer months contracts are more expensive than that of distant months - global investors are taking advantage of international sugar prices having taken a break from their recent highs in global market.
But heightened investor interest coupled with Indias supply shortfall and political compulsions, further spike in international prices is but in the offing. It is as obvious as it gets that the import prices will follow suit and would be much higher in the days to come - certainly the government should not need a second invitation to decide on imports.
So while the idea to allow duty-free sugar imports through private sector is plausible, it needs to be turned into a reality before it gets too little too late. This is the ideal time to let private importers approach and tap the Brazilian market at relatively cheaper rates before the sugar gets to the international trading indices, which would then be of little or no use for private importers either.
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