The Ministry of Consumer Affairs, Food & Public Distribution announced that ex-mill sugar prices have declined by around 20% in recent days. Meanwhile, retail prices are also experiencing a decline. This decline is expected to continue along with the transmission of changes through the supply chain, potentially leading to a downward movement in retail prices.
This comes following reports suggesting that at least 3 lakh tonnes of processed sugar is expected to enter the market. The government had earlier allowed 10 lakh tonnes of raw sugar through duty-free imports, while also allowing processors to sell some refined sugar in the domestic market, which was earlier meant to be exported.
Sugar prices, however, have remained nearly 31% higher than a month ago, even as the rates eased slightly on Thursday.
The Ministry claims that despite having adequate stocks of sugar, the country has recently experienced a sharp spike in prices. The latest verification exercise at mills reveals that in several cases, the stocks are higher compared to the monthly returns submitted to the government and that “there is no justification for panic buying or excessive stocking,” the Ministry of Consumer Affairs said. It further explains that the practice of short selling, as resorted to by some sugar mills, constrains market supplies despite the availability of sufficient stock.
Short selling is the practice by sugar mills in which they sell less sugar than the quantity allocated to them.
The Government has also decided to replace the existing monthly quota system with a fortnightly sugar allocation system from September, according to which the mills have to sell at least 40% of the total stock in the first week, with the remaining stock to be sold in the subsequent weeks. This system enables the government to closely monitor demand and supply, track changes in market conditions and respond accordingly, and release additional stock when there is a shortage in the market.
As per the Ministry, sugar mills have been directed to dispatch the sold sugar to dealers within seven days of sale. This, along with the fortnightly sugar allocation system, is expected to boost sugar movement through the supply chain. Bulk consumers such as beverage makers are also advised not to accumulate excess stock.
“Sugar prices have corrected by nearly 20 per cent from recent highs, with supply-side measures and improved market visibility beginning to reflect in the market. The correction is expected to continue as festive buying normalises and fresh sugar becomes available over the coming weeks,” the Indian Sugar & Bio-energy Manufacturers Association (ISMA) said in a statement on Thursday.
The Ministry of Consumer Affairs, Food & Public Distribution also ensures that more than 10 LMT of sugar will be produced during the new season, set to begin on October 15. The mills are permitted to sell the sugar produced during the season without restriction, thus providing enough stock to comply with domestic needs.
