NEW DELHI (Bloomberg) -- India, the world’s biggest user of sugar, may lift the quantity producers set aside for selling to the nation’s poor, to increase supplies and cool record prices, Agriculture Minister Sharad Pawar said.

The government may raise the so-called levy quota ahead of the festival season, Pawar told reporters in New Delhi after a second round of talks with mills on measures to boost supplies. Producers will be reimbursed for the sales, he said.
Inadequate rains last year pared cane yields and cut output in half, turning the South Asian nation into a net importer for the first time since 2006. Production prospects for the season starting Oct. 1 are “not bright” because of drought in more than a third of the nation’s 626 districts, Pawar said Wednesday.
Output in the year ending Sept. 30 may be 15 million tons, lagging demand of as much as 23 million tons, Pawar said. Area under cane has shrunk to 4.25 million hectares from 4.38 million hectares a year ago, the farm ministry said last week.
Sugar rose to a 28-year high of 23.33 cents a pound on Aug. 12 in New York on concern a smaller crop in India will prolong a global deficit for a second year. The price in Vashi, India’s biggest wholesale market, reached a record 3,094.80 rupees per 100 kilograms on Aug. 17.
The levy obligation requires mills to sell 10 percent of their output to the government at subsidized prices for resale to the poor via a network of state-run fair price shops. While mills can sell 90 percent of their production at market rates, the government fixes the quantity and time of the sale.
“We will have to collectively think as to how we ensure that this sugar really reaches the intended beneficiaries,” Pawar told reporters.
The monsoon rains, the main source for irrigation for the nation’s 235 million farmers, may be the weakest in seven years this year, the weather office said last week. Rain in the June- September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, it said.