India weighs sugar import duty cut to curb record local prices

India, the world’s second-largest sugar producer, is considering cutting its import duty on the commodity to help curb domestic prices that recently climbed to a record.

Officials are weighing proposals to lower or scrap the 100% tax on inbound shipments in an effort to boost local supplies, according to people familiar with the matter, who asked not to be identified because the discussions are confidential. The deliberations come just before a seasonal surge in sugar demand for the festival season, adding to the incentive to rein in rising prices.

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Spokespersons for the food and commerce ministries didn’t immediately reply to requests for comment.

The move is a further sign of the supply strain facing the global sugar market. Concerns are mounting that the El Niño weather phenomenon will curb harvests, which recently pushed New York futures to the highest in about a year.

The crop worries extend to India, where the monsoon rains that sugarcane crops depend on are running 13% below normal, according to the India Meteorological Department. The deficit stood at more than 40% near the end of June — the first month of the rainy season — delaying sowing of some crops.

Ex-mill sugar prices in Maharashtra recently hit about 46 rupees (48 cents) a kilogram, an all-time high, according to the Indian Sugar and Bio-energy Manufacturers Association, or ISMA. Consumption in India typically peaks from late August through January as demand rises for traditional sweets, processed foods and beverages during the festival season.

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Factories in India’s top sugarcane-producing states of Uttar Pradesh and Maharashtra plan to bring forward crushing by 10 to 15 days from the usual early-November start, following consultations with the food ministry, to bolster supplies. The government also recently imposed stockpile limits on traders to discourage hoarding and contain inflation risks.

The country doesn’t typically import sugar for domestic consumption, last bringing in substantial volumes in 2017-18, ISMA data shows.

Sugarcane was planted on 5.83 million hectares (14.4 million acres) as of Aug. 14, slightly below the level at this time last year, according to the farm ministry.