Feb. 26 (Bloomberg) -- India, the world’s biggest sugar producer, plans to seek a consensus among various ministries on ending four-decade old state controls on the domestic industry, Food Minister K.V. Thomas said. Shares of sugar mills declined.
A cabinet approval to allow mills freely sell sugar in the local market will be sought only after an agreement is reached among ministries including finance, which has expressed concerns over possible increase in prices, Thomas said in an interview in New Delhi today. The food ministry also plans to end the practice of the government buying sugar from mills at below market prices to supply to the poor, Thomas said Jan. 31.
Scrapping of state purchases from mills at below market price may allow Bajaj Hindusthan Ltd. and Balrampur Chini Mills Ltd., the nation’s biggest mills, and other producers, earn about 27 billion rupees ($499 million) to 30 billion rupees annually, according to the Indian Sugar Mills Association. A government panel in October recommended ending of controls including limits on sales by mills, first introduced in 1972.
“The finance ministry has expressed concerns over inflation and we will address those concerns,” Thomas said. “I do not think there will be any major increase in sugar prices after decontrol.”
Consultations with the finance ministry will begin after the federal budget on Feb. 28, he said.
While wholesale inflation eased to a 38-month low of 6.62 percent in January, the increase in consumer prices accelerated to 10.79 percent, one of the highest levels in major economies. Sugar futures gained 12 percent on the National Commodity & Derivatives Exchange Ltd. in Mumbai last year.
“The market was expecting a decision before the budget,” Rohit Agarwal, an analyst at SPA Securities Ltd., said by phone from Kolkata. “It looks like it is definitely delayed and that’s the reason why sugar shares tanked today.”
Bajaj Hindusthan fell 2.6 percent to 22.35 rupees in Mumbai, Balrampur dropped 4.4 percent to 45.25 rupees, and Shree Renuka Sugars Ltd., the top refiner, fell 4.1 percent to 26.05 rupees.
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