India to Consider Tomorrow Proposal to End Curbs on Sugar Mills

India, the world’s second-biggest sugar producer, deferred for a day consideration of a proposal to scrap four-decade-old state curbs on mills, Food Minister K.V. Thomas said.

Prime Minister Manmohan Singh will head a cabinet meeting tomorrow that will consider allowing mills to sell sugar freely in the local market, Thomas told reporters in New Delhi today. It will also discuss ending a government program of buying sugar from producers at below-market prices to supply to the poor, he said. Discussion of the proposals was deferred today as some senior ministers including Finance Minister Palaniappan Chidambaram weren’t present at a cabinet meeting, Thomas said.

Scrapping of state purchases may allow Bajaj Hindusthan Ltd. (BJH) and Balrampur Chini Mills Ltd. (BRCM), the biggest mills, and other producers to boost revenues by about 27 billion rupees ($497 million) annually, according to Abinash Verma, director general of the Indian Sugar Mills Association. A government panel in October recommended ending state controls including regulation of sales by the mills, first introduced in 1972.

Sugar makers are restricted by rules that govern sales by each mill for every four-month period in order to cap prices, while states fix cane rates to help 50 million farmers earn more. Factories in Uttar Pradesh, set to be the biggest producing state, owed 54.6 billion rupees to growers, Thomas told parliament on Feb. 26, after cane prices were raised to a record for the 2012-2013 crop.

Shares of sugar producers rallied in Mumbai. Bajaj Hindusthan Ltd. rose 1.2 percent to 21.95 rupees, Shree Renuka Sugars Ltd. (SHRS), the top refiner, advanced 1.3 percent to 26.85 rupees, while Dhampur Sugar Mills Ltd. (DSM) climbed 2.9 percent to 48.60 rupees.

Drought Conditions

Sugar for delivery in April fell 0.6 percent to 3,025 rupees per 100 kilograms on the National Commodity & Derivatives Exchange Ltd. in Mumbai today. Futures have fallen 7.4 percent this year.

Production in India, the world’s largest consumer, will fall to 24 million metric tons next season from 24.5 million tons this year as a drought in Maharashtra and Karnataka, which together account for 45 percent of output, curbs planting, Farm Minister Sharad Pawar said March 13.

To contact the reporters on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net; Pratik Parija in New Delhi at pparija@bloomberg.net

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net

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