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This Article is From Jan 18, 2010

Why elections drive sugar prices up

New Delhi: Agriculture Minister Sharad Pawar is in damage control mode over rising sugar prices. Last week, he had come under scrutiny for dismissing questions on rising prices with the remark, "I am not a fortune teller."

"There is a drop in wholesale price of sugar. It has come down by 10%. The retail price will also come down in 10-12 days," said Pawar on Monday.

Despite his assurances, it seems the government's wrong policies turned sugar into a bitter story - and prices are unlikely to fall. Here's a reality check:

  • Retail price of sugar is Rs 45-50 per kilogramme
  • Sugarcane output has been low, the Government has no buffer stock left i.e. there's a huge gap between demand and supply
  • Global prices of raw sugarcane are at an all-time high i.e. imports are very expensive, and may go up further
Politics has made matters worse.

Industry sources say the Government flooded the market with sugar to keep prices 'artificially' low during the election year. The entire buffer stock of sugar was exhausted, and the real sugar shortage went unnoticed through the general elections and Maharashtra elections. Sugar was at least 15 rupees cheaper before October.

Experts say the news of supply deficit in India is pushing global prices further.

"Why did the Government not import sugar earlier? They knew of the shortage. When they could import wheat, why could they not import sugar? Now prices will go up even further," says S L Jain, Former Director General, Indian Sugar Mills Association.

All these factors point to a grim reality - the sugar story may get even bitterer in days to come.

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