In a proactive move, the Indian government has allowed sugar mills to start selling sugar from Tuesday after allocating 14 lakh tonnes (lt) for the second fortnight (October 16-31) of this month. This is because ex-mill prices have surged by nearly ₹1,000/quintal in the past 10 days. However, the next 25 days will be crucial to guard against further spurt in prices as traders anticipate negligible stock at mill levels.
Total quantity released for sales in the second fortnight will be 16-14 lt to domestic sugar mills and 2 lt to importers, the Order issued by the Food Ministry showed.
Official sources said that in view of the current spurt in ex-mill sugar prices in the past 10 days, the quota announcement has been made two days in advance, and it would take care of the demand of the trade in view of the upcoming Diwali festival, to be celebrated on November 8. The government had received complaints that some mills had exhausted their sugar sales quota of October 1-15 period and thereby unable to sell and the information also is said to have fuelled speculation of low stock and current price rise, sources said.
Next challenge
While sugar demand for Dussehra festival, to be celebrated October 20, is almost over, the next challenge will be for Diwali demand. Already 30 mills in Maharashtra have started crushing operations and 10 more are expected in next few days. Similarly, the government expects 10-15 mills to start crushing in Uttar Pradesh from around October 20.
“As the government has already committed to allow mills sell their sugar produced in this month without waiting for the quota, if 15 lt of sugar is produced there may be some ease in meeting November demand. But the situation is very tight,” a source said.
According to the Food Ministry’s Order, mills in the top three sugar producing states have been allocated 11.59 lt or 83 per cent of total 14 lt across the country. It includes 4.76 lt (Maharashtra), 4.51 lt (Uttar Pradesh) and 2.32 lt (Karnataka). Out of 587 mills, 134 have not received any allocation while 39 mills have got quota upto 100 tonnes.
Also, the government has allocated 1.30 lt to Shree Renuka Sugars and 70,000 tonnes to Shri Dutt India for the second fortnight. Though these two refiners had approval of 2.65 lt imported sugar to sell in domestic market, and the government had allocated 3 lt (1 lt each fortnight) between September 1 and October 15, their could sell less than 60,000 tonnes due to non-parity in prices, sources said.
Retail price inch up
The government had announced 26.5 lt sugar quota during September and 30 lt for October. However, apart from imported sugar, some quantity of domestically produced sweetener also could not be sold, sources said.
On the other hand, in Delhi’s retail market, sugar prices have inched up to ₹65/kg from ₹60 in some places in the past 2-3 days after a surge in ex-mill prices, whereas in many other places retail prices are yet to show a rise. In Sonepur, Odisha, sugar is retailed at ₹50-55.
The ex-mill price in Uttar Pradesh is said to have reached ₹5,400/quintal from about ₹4,450 10 days ago. Similar rise is noticed in other states as well, in Maharashtra it is quoted at ₹5,100l.
“If imported sugar quota is excluded, total allocation to domestic sugar mills in October is 27 lt against India’s closing stock of 32-35 lt on September 30. Since the demand in November may also be around 24-25 lt, India needs at least 12-13 lt production in October to manage the next month’s requirement,” said a trade source.