MUMBAI (Commoditiescontrol) - Domestic sugar prices moved down in the country after a handsome rally during last fortnight.
Sweetener prices rose by 15% in wholesale market, while ex. mill sugar rates also jumped 13% during the same period.
The rise in the price was mainly attributed to the government decisions of increasing import tariff and imposing a limit on sugar sales from mills during February and March. But after absorbing the impact, sugar prices witnessed downtrend later in the week.
Sugar prices dropped at mill level as well market level in both Maharashtra and Uttar Pradesh following weak demand due to ample availability of commodity.
While earlier as of January ending, the ex. mill sugar prices have declined about 22-25% since new sugar season started, while wholesale prices also fell almost 20% during last four months. However, the Central government implemented various measures to support domestic sugar prices, and arrest falling sweetener prices amid excess supplies on the back of higher output in the country.
Firstly, the Centre had withdrawn the stocks holding limits for traders in December last year (on Dec.19), to improve sugar sells from mills and increase the demand at mill level.
Secondly, the government has increased the custom duty on imported sugar to 100% in current month (on Feb 6), to restrict cheap sugar shipments from Pakistan. As, Pakistan government is offering a cash subsidy of PKR 10.7per Kg (INR 6.29) for sugar exports, while the Pakistan's Sindh province government is providing additional subsidy of PKR 9.30 per Kg (INR 5.47).
Meanwhile, the combined subsidy is almost PKR 20 per Kg (INR 12) for sugar exports. Which made the price for sugar exports from Sindh province as cheaper as PKR 26,500 per tonne (Rs 15,580) for export purposes. However, to there were possibilities of sugar imports at 50% duty also. Although, Indian government doubled the import tariff on sugar to 100% from 50% to curb cheaper imports.
After the imposition of import duty sugar prices were slightly increased, but ex. mill sugar rates were still below the production cost during second week of February month.
Lastly, on February 8th, the Centre too imposed the stock holding limits on sugar mills to restrict supplies in market.
According to that, government fixed the release quota for each mill of the country for February and March month.
As per the notification, till the end of February month mills have to maintain sugar stock of 83% of the total ending stock as of January ending. (Full Story)
This means, sugar mills from the country have to sell only 17% stock available with them as on January 31st, while mills could not not sell the sugar produced during current (February) month.
For March month, the Centre set the selling quantity of sugar at 14% of February ending stock. This means, sugar mills have to hold 86% of the closing stock on the last date of February month, and also have to keep sugar produced in March and not sell that stock.
Additionally, if there any sugar exports during the February and March, that will be excluded from the release quota.
Nevertheless, after capping sugar sells from mills, the prices of sweetener in spot market rose moderately, as wholesale rates increased almost 15% during the period.
However, with firming spot sugar prices the Maharashtra State Cooperative (MSC) Bank has also increased the valuations for sugar by Rs. 130 per quintal to Rs. 3,100 per quintal on February 21. State millers will get 85% of the valuation Amount, meanwhile state sugar will actually get Rs. 2,635 per quintal to pay the Fair and Ruminative Price (FRP).
While the total Rs. 1,885 per quintal cane payment will be available for sugarcane growers after deducting transportation, harvesting and other charges.
At the start of current season, Maharashtra state millers have decided to pay FRP plus another two hundred rupees to farmers, but due to drop in sugar prices since new sugar started, millers were paying Rs. 2,500 per tonnes of sugarcane in the first installment payment.
Moreover, to help the sugar industry to clear its cane dues arrears, Maharashtra state government is considering to procure 25% of sugar produced from state co-operative sugar mills in current sugar as on January month. The estimated sugar purchase is estimated to be 10 lakh to 20 lakh tonnes.
The Maharashtra State Cooperative Marketing Federation would procure sugar from mills at the rate of Rs 3,200 per quintal to support local falling prices. State government will soon take decision in the current season's budget session. The Maharashtra budget 2018-19 to be presented on March 9, while the month long budget session is starting from February 26.
Moreover, the sugar procurement decision will be finalised in the Budget only.
Meanwhile, domestic sugar prices are expected rise further after the decision get finalised. But still the rally would be for short term period and prices may remain under check on higher sugar production estimates in the country.
India's sugar production has reached at 203.14 lakh tonnes as on February 15th, in current sugar season 2017-18 (October to September), as per the industry body Indian Sugar Mills Association (ISMA). Sugar output has jumped by 38% from previous season.
While sugar mills from the country are estimated to produce 270 lakh tonnes of sugar in ongoing season, up 33% up from 203 lakh tonnes in the previous year, as per the IA Kazakh-Zerno. While Green Pool, the Australian-based analysis group forecasted country's sugar output at 281 lakh tonnes.
However, higher sugar availability in domestic market may keep sugar prices under pressure in current season.
The Indian Sugar Mills Association (ISMA) and West Indian Sugar Mills Association (WISMA) requested central government to allow sugar exports from India to reduce the surplus sugar stocks from the country. While ISMA also asked for incentives for exports.
As per the WISMA, India sugar mills are expected to produce 265 lakh to 270 lakh tonnes of sugar in current sugar season 2017-18 (October to September), against the domestic consumption of 250 lakh tonnes.
Moreover, the government may remove 20% export duty on sugar to reduce the surplus stocks of sugar. Government can also allow export of 15 lakh to 20 lakh tonnes of sugar under Minimum Indicative Export Quota (MIEQ).
Thus, exports will support the local sweetener prices by shipping out the excess sugar stock available in the domestic market.
(By Commoditiescontrol Bureau: +91-22-40015532)
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