CHENNAI, May 7: Shortsightedness on the part of the government is likely to lead to a severe shortage in levy sugar during the year 1997-98 (October-September). The shortfall which is expected to be in the range of 20 lakh tonnes may force the government to import as the estimated overall sugar demand-supply situation during the period is grim.

According to industry sources the 1996-97 season began with an opening stock of 13 lakh tonnes on the levy account. The accretion to the stocks during the year is expected to be around 40 lakh tonnes which puts the total available stock at 53 lakh tonnes. Consumption (distribution through PDS) is likely to be in the range of about 50 lakh tonnes if the current level of releases is maintained. This leaves the carry forward stock at three lakh tonnes which is less than one month's consumption.

The addition to the levy sugar in the 1997-98 sugar season is set to fall sharply to about 25 lakh tonnes. This would result in a shortage of about 20 lakh tonnes as the availabilty is only about 28 lakh tonnes as against the requirement of 50 lakh tonnes.

A combination of factors has led to this situation. Increased monthly releases for distribution through PDS in the last few months which has gone up from around 3.33 lakh tonnes per month to about 4 lakh tonnes has resulted in the possibility of lower carry forward stock. This coupled with the lower sugar production estimated in the 1997-98 season and the recent policy of the government to bring back the incentive scheme (exemption from levy sugar) to the sugar units set up after April 1994 has resulted in lower addition to the levy sugar stock for the year 1997-98 thereby leading to a demand-supply gap.

The government has a few options to bridge this gap. It can either import or buy from the industry (out of the free sugar stocks) at a price which is slightly less than the imported value.

By buying from the industry the government can save on the valuable foreign exchange and also not put additional pressure on the port facilities. The government can also borrow some stock from the industry and replace it once adequate stocks are available. But with free sale stock also in a tight situation there is a possibility of the retail price flaring up.

The government can use up the 10 lakh tonnes of buffer stock for which it is paying the carrying cost to the industry.

For the balance it has to find a way out- a way which will result in a minimum damage to the exchequer.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.