Monday August 31, 09:40 PM

Drought widens, sugar prices worry govt

By Ratnajyoti Dutta

NEW DELHI (Reuters) - Drought has affected 278 districts, increasing its spread despite higher rainfall in the past two weeks and making the rising prices of sugar and lentils the big worry for the country, the government said.

Monsoon rains since June 1 were 24 percent in deficit on Aug 27, narrowing the shortfall by one percentage point from the previous day, according to an official statement on Monday.

The rainfall deficit has been even worse in the top cane-growing state of Uttar Pradesh, raising expectations of a shortage and high imports by the world's top sugar consumer, and helping raw sugar futures surge to their highest in 28-½ years.

Out of India's more than 600 districts, 26 more have been declared drought hit since Thursday, when Finance Minister Pranab Mukherjee said the number was 252.

Rainfall has been uneven. The central region, where most of India's soybean is grown, has seen heavy rains in the past few days, helping the crop although output is still expected to fall.

Traders and industry officials expect soybean output in India, the world's top edible oil buyer, could fall 9-19 percent this year due to failed monsoon.

Earlier, data showed the consumer price index rose 11.89 percent in July from a year earlier, rising sharply from June's annual rise of 9.29 percent as prices of food items increased.

The cabinet reviewed the price situation following the failed monsoon and said the situation was worrying.

"It was noted that the major areas of concern are prices of pulses and sugar," the government said in a statement.

The government has taken several steps to increase supplies of sugar, including easier imports and stern steps to control hoarding of sugar by traders.

The Economic Times reported on Monday that state governments had asked several food and beverage companies, including Coca-Cola, Nestle and Pepsico India, to give details of sugar stocks they held.

The government said several meetings had been held with states to enforce stock limits and carry out operations against hoarding.

"These steps will help in controlling the price increase by increasing the availability," it said.

Simbhaoli Sugars Executive Director S.S.C. Rao said India's sugar stocks at the start of the new season on Oct.1 were likely to be 2.7 million tonnes, down almost three-quarters from 10 million tonnes a year ago.

(Additional reporting by Mayank Bhardwaj, Lewa Pardumoan and Rajkumar Ray; writing by Himangshu Watts; Editing by John Mair)

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