Trucks carry sugarcane for processing at Quang Phu Sugar Factory in central Quang Ngai Province. The over-supply of sugar reduced sugar prices to their lowest level in the past few years. –— VNA/VNS Photo Nguyen Dang Lam

VSSA chairman Nguyen Hai said that, by the end of April, inventory reached 690,300 tonnes, including about 663,600 tonnes at factories and roughly 26,700 tonnes at trading companies affiliated with the association, according to the Vietnam News Agency.

That was a record high inventory, which was over 100,000 tonnes higher than the level of the the same period last year.

The over-supply pushed sugar prices down to their lowest levels of the past few years. Prices dropped from VND18-19 million (US$857-905) per tonne in 2011 to VND12-13 million ($571-619) at present.

The large inventory was mainly due to slow consumption, with a volume of 100,000-120,000 tonnes of sugar per month produced at each factory, which was the same as in previous years, he said. Customers had reduced their spending on sugar and sugar products as the economic crisis led to a slowdown in sugar consumption.

The Ministry of Agriculture and Rural Development (MARD) said the sugar cane crop for 2013-14 is expected to increase areas being cultivated for growing sugar cane by 8,000ha to 306,000ha compared to the previous crop, with an expected harvest of 1.6 million tonnes of sugar.

Under the commitment to the World Trade Organisation , Viet Nam imports 77,000 tonnes of sugar annually. At the same time, some 400,000-500,000 tonnes of sugar have been imported illegally to Viet Nam each year, said officials.

Domestic demand has reached about 1.4 million tonnes of sugar, according to the association.

The MARD has asked the Ministry of Industry and Trade (MoIT) to permit exports of 400,000 tonnes of sugar through border crossings with China, in a bid to reduce domestic inventory.

The association has also proposed the MoIT permit exports of sugar to China with flexible mechanisms and to reduce value added taxes to zero for bagasse and treacle, Hai said.

With the current value-added tax rate of 5 per cent, the Government should set up a fund for re-investment in the local sugar cane and sugar industry, using revenues from part of the value-added tax paid by sugar producers and traders, he said. The fund is currently used to provide financial support for sugar cane growers and projects on developing sugar cane enterprises.

In the future, the industry will focus on developing new sugar seeds with higher quality and quantities, promoting combinations between production and consumption, and developing support products to increase added value.

Prime Minister Nguyen Tan Dung has signed a decision to support sugar factories by investing in producing electricity from bagasse, which is is often burned after processing.

By generating electricity, factories would reduce spending and lower production costs, while increasing competitiveness with illegal sugar imports. — VNS