Free-sale quota distorts sugar prices

While prices have risen by Rs 50-60 in western UP, it has gone by Rs 25-35 a quintal in Maharashtra

Sugar prices have increased in the north, but have remained sluggish in Maharashtra owing to a higher free-sale quota fixed for the state for the current month.

While prices have increased over the last two days by Rs 50-60 a quintal in western Uttar Pradesh, it has gone by Rs 25-35 a quintal in Maharashtra.

Currently, S30 sugar for mill delivery is sold in the range of Rs 1,722-1,750 while naka delivery is quoted in the range of Rs 1,800-1,815 in Mumbai.

M30 grade sugar for mill and naka delivery is quoted at Rs 1,765-1,830 and Rs 1,835-1,885. In the spot Vashi market, S30 is sold between Rs 1,840 and Rs 1,860, while M30 is quoted between Rs 1,900 and Rs 1,950 a quintal.

"The current price rise is a consequence of Makar Sankranti demand, which rose after a lull in December. But after January 14, prices will settle down," said Ashok Jain, secretary, Sugar Merchant Association.

No upward trend is expected at least in the near future owing to abundant supply in Mumbai market, he added. Arrivals in Mumbai, today, is around 75 gadi against 50 gadi 15-day ago (1 gadi = 1250 bags = 12.5 tonne)

Sugar prices have turned volatile after the government announced quota for the next quarter - 12 lakh tonne for January, 11.5 lakh tonne for February and 13 lakh tonne for March. An additional release of 1 lakh tonne announced by the Union minister of consumer affairs, food and public distribution, Sharad Pawar is also a part of the quota.

The move by the ministry was in the wake of spiralling prices, both in domestic retail and wholesale markets. The total sugar available for indigenous consumption would be at least 14.16 lakh tonne, which includes the additional quota release announced recently. Excess quota has been allotted for March to all states because of estimated rising demand owing to marriage season.

Ex-mill sugar prices in Western Uttar Pradesh are quoted in the range of Rs 1,740-1,770 (M30) and Rs 1,705- 1,735 (S30) per quintal. The hike is too much despite sugar mills operating with only 70 per cent of capacity owing to a cane supply crunch in the area. "Farmers are not going out for cane cultivation owing to a cold wave and, hence, mills are grappling with cane supplies," Anil Kapoor of Satyadev Omprakash, a trading firm, said.

The marginal upward movement was imminent as prices had bottomed out in December. Now, sugar prices are expected to decline after 10 days by Rs 15-20 and settled between Rs 1,740 and Rs 1,750 during the month.