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| Sunday, 12 February 2006 |
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Business |  |
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Lankans enjoy cheaper sugar by Gamini Warushamana The price of sugar in Colombo last week hit a new high of Rs. 53.21 per kilogram, compared to January's average price of Rs. 46.43 per kilo as a result of the increased international price.
The price of sugar in Colombo is 2-3 rupees less than international prices. According to the international market the wholesale price of sugar should be between Rs. 53 - Rs. 55 per kilo. In January this year sugar prices in the international market increased by over $100 per tonne and over 40% during the last two months, market analysts said. According to the Department of Census and Statistics the average sugar price in 2005 was Rs. 41.44 per kilo, a 11.7% increase compared to the average price in 2004. Today's sugar prices in India works out to Sri Lankan Rs. 55, Europe over Rs. 100 and Australia over Rs. 80 per kilo, they said. Finance Ministry sources said that the London FOB price of sugar was $448 per tonne last week. Last Wednesday the prices dropped by $10 per tonne. The international sugar price is highly volatile but the local market price does not reflect these price fluctuations on account of the present market activities. Market sources said that importers and wholesalers had a large stock of sugar when the price of sugar increased in the international market. In addition there are 40,000 MTs of imported sugar with bondsmen. They import and hold stocks and customs duties are decided on at the time the stock is released to the market. This stock cushions the impact of international price escalation and in January the local market received the stocks imported earlier. The new high price of sugar now affects the market. International prices have increased due to several factors. The main reason is production of bio fuel ethanol from sugarcane which is increasingly used as a substitute for gasoline. As a result of increasing crude oil prices ethanol usage has increased. At the same time the demand for sugar has increased in Pakistan, China, Russia and Iraq. Sri Lanka imports 80% of the country's sugar requirements. Production in local factories will begin in mid March as they do not have any stocks at present. This is one reason why the country cannot cushion the impact of international price escalation in the long run. As an immediate relief measure the government waived Rs.4.50 import duty on brown sugar. However, this will not help counter the international trend. The international sugar price hit the 25-year peak in January this year and would possibly head higher as investors see a potential to divert more sugarcane to make bio fuel. Ethanol as a gasoline substitute is increasing rapidly worldwide. In USA one of 40 cars and trucks now runs on a commercial mix of gasoline and ethanol. The ethanol is mostly extracted from corn and now the shift is to sugarcane. In Brazil 55% of sugar could be allocated for bio fuel production in the 2006/07 production cycle. It was 52.5% in the 2005/06 production cycle. Brazil is the largest sugar exporter in the world, producing nearly 30 million tons of sugar and exporting nearly 20 million tons according to 2005 figures. |
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However, Sri Lankan consumers enjoy a lower price than what prevails in
the international market due to the buffer stock available in the country,
traders said. 
