The domestic price of sugar reached new highs last week led by a supply shortage. Imported sugar costs about Rs 37,500 per tonne. Domestic sugar costs about Rs 40,000 per tonne. The supply of sugar in India is pegged at around 16 m tonnes per annum. Demand is about 23 m tonnes. As a result, India will experience a shortfall for the second year in a row. An additional import of 1 m tonnes of sugar is on the cards.
The high sugar prices are now kicking off a political battle. Between the Agriculture ministry in the centre and the UP state government. It may be noted that India's second largest sugar-producing state, Uttar Pradesh has banned the import of raw sugar. However, the ban came after farmers protested demanding higher prices for their crops from sugar mills. The Union minister believes the ban causes a deficit of about 250,000 tonnes per month. In fact, about 770, 000 tonnes of sugar is lying at various ports right now. While it is easy to blame the state government, the matter is not quite so simple. No political party can afford to alienate the farmers. Be it state governments or the union government. In the long term, such situations cannot be avoided by blame games in our opinion. The way agricultural produce is procured and distributed in India needs a thorough revision. The leakages must be plugged. At the same time no party to the sugar trade should be able to benefit from everyone else's expense.
The peculiar case of Indian real estate
The threat of the financial meltdown now seems far behind us. At least that's how one would feel going by the recovery in the stock markets. During the crash, the worst hit segment was the real estate pack. Now, they have also swung up. Surely then, the real estate market must have recovered. Not quite. Real estate prices haven't recovered a great deal after a correction which ended six months ago. Yes, interest rates are low. The economy has shaken off the slowdown. And the demand for housing remains. But much of the supply is in the expensive segment. As per the Wall Street Journal, developers in places like Mumbai are able to sell only about 20% of their inventory per month. In 2007, the figure was 33%. In our opinion, developers must realise that too many of them are trying to offer products that's unaffordable for most Indians. But we don't expect that to happen anytime soon. Not at a time when as many as 15 real estate IPOs are set to debut in the stock markets.