About 500,000 tonnes of additional sugar to be released in the July-Sept quarter.
The sugar industry's euphoria on rising sugar prices may not last long. Wary of the recent surge in sugar prices and its impact on inflation, the government has decided to release an additional 500,000 tonnes of the commodity for the remaining period of the July-September quarter.
This is in addition to the 4.8 million tonnes released for the whole quarter. Sugar prices have moved up by about 25 per cent since July to Rs 1,800 a quintal.
“In the last few days, the prices of sugar in the open market have increased in spite of much higher availability of sugar in the July-September quarter over last year’s corresponding quarter,” said government sources. Sugar availability in the same quarter last year was 3.6 million tonnes.
The release of 500,000 tonnes of the sweetener should soften open market prices. The government would consider releasing more if sugar prices continue to rise.
This is the first step by the government to check sugar prices since June 2006, when it banned exports to check domestic availability and prices. However, the ban followed a record sugar output and a huge crash in prices.
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This caused huge losses to mills and pile-up arrears to the farmers. The government then announced a slew of measures to help sugar mills — export ban removal and freight incentives on export, creation of a five million-tonne buffer stock and interest-free loans against excise payments.
The food ministry has, in consultations with the cane commissioners of major producing states, arrived at a provisional sugar production estimate of 22 million tonnes for the 2008-09 season (October-September).
Along with an estimated carryover of 11 million tonnes from the current season, an output of 22 million tonnes would imply a total availability of 33 million tonnes for the season 2008-09 as against the consumption demand of 22 million tonnes, they added.
Sugar, as a commodity, has always been vulnerable to immediate government action because of the high weight allotted to it in the wholesale price index (WPI) inflation. The sweetener’s weight in the WPI at 3.62 per cent is more than cement’s 1.73 per cent, wheat’s 1.38 per cent and just lower to iron and steel’s combined weight of 3.64 per cent. Inflation for the week ended July 26 stood at a 13-year high of 12.01 per cent.