NEW DELHI (Commoditiescontrol) - Sugar prices rallied considerably in the domestic market in recent past as price hike has been almost 40 percent in the ongoing sugar marketing/crushing season which began with October 1, 2015. It seems sugar has gone the pulses way, however, case is different as there has been shortage of pulses stocks while there is surplus stock of sugar in the country.
The central government is all set to check spikes in sugar prices, hence, the Ministry of Consumer Affairs, Food and Public Distribution has directed state governments and union territories to fix stock limit for a sugar dealer.
The central government came into action in same way last year when prices of pulses were skyrocketing last year during the festive season. Stock holding limits were fixed on pulses and de-hoarding operation was carried out.
But pulses prices shot up due to shortfall in production against the consumption demand. Partly, same case is in sugar as prices have rallied in anticipation of lower output in the current season.
However, the government has claimed surplus sugar stocks to meet consumption demand as there have been carryover stocks of 90 lakh lakh tonnes.
As on April 30, 2016, Indian sugar mills have produced 246.03 lakh tonnes of sugar, down 11 percent from 276.04 lakh tonnes produced in the corresponding year ago period.
As per the ISMA reports, 48 sugar mills are still in operation while number of mills in operation in the corresponding year ago period was 97.
As per the ISMA estimates, considering the mills in operation, sugar output would be just above 250 lakh tonnes in the current season and carryover stocks are likely at 90.80 lakh tonnes, while domestic consumption has been estimated around 256 lakh tonnes. India has exported 15 lakh tonnes of sugar so far.
Hence, sugar mills would still have a carryover stock of 70 lakh tonnes at the end of the current season if further sugar is not exported from the country. Since, sugar mills have received higher prices of sugar in the domestic market as compared to overseas market, exports has been almost nil in recent past.
Meanwhile, it is reportedly said that the government is considering to scrap the mandatory quota to export sugar as much as 32 lakh tonnes in the current season.
Analysts say the funds are betting on a fundamental change in the supply and demand picture for sugar. Following several years of surplus production, new production of sugar in the 2015-2016 season is expected to fall short of demand by approximately 10 million to 11 million tons, which the Hightower Report in Chicago said would be the largest deficit in at least 31 years.
Stock of sugar companies rallied on the Bombay Stock Exchange on Monday on low output data released by ISMA.
Sugar traded in a range of Rs, 3,552-3,782/100kg in the wholesale market of Mumbai in the previous session and the sweetener held at Rs. 3,610-15/100kg in Muzaffarnagar. Delhi spot sugar traded at Rs. 3,580-3,640/100kg on Monday.
Prices have come down after the government decided to impose stock limits as the sweetener ruled above Rs. 3,800/100kg in the wholesale market last month.
Sugar for May delivery on the National Commodity & Derivatives Exchange Ltd (NCDEX) rose to highest level since September 2012 during last month. It stretched to 3,649/100kg, however later on profit booking pulled prices lower amid worries over government intervention. May delivery sugar on Monday, April 2, 2016 settled 1 percent down at 3,305/100kg.
According to traders, sugar prices surged due to speculative practices on the NCDEX which should be checked. Sushil Kumar, a Delhi based trader said, “If sugar mills are asked mandatorily to liquidate their 10 percent of stocks every month, spikes in sugar prices would be checked.”
Centre Fixes Sugar Stock Holding& Turn Over Limits
Ministry of Consumer Affairs, Food and Public Distribution has fixed stock holding and turn over limits of sugar for the dealers. As per the notification, no dealers of sugar shall hold any stock for a period exceeding 30 days from date of receipt by him of such stocks and shall not keep sugar in stock any time beyond the stock limit. The central government has fixed a stock limit of 10,000 quintals for dealers who bring sugar outside from West Bengal and 5,000 quintals for other places.
This order will not apply to the holdings of sugar on government account or dealers nominated by the state government for public distribution system and by the Food Corporation of India.
As per the order, the central government authority or state governments or union territory administrations have to fix the stocks and turn over limits in their respective states or union territories subject to the condition that the stock limit or turn over period limit will not be higher than the limit or period fixed by the central government.
(By Commoditiescontrol Bureau; +91-22-40015533)
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