Sugar mills to raise supply after govt nudge to regulate prices

ISMA says it advised its members to boost supply to curtail prices

Following direction from the government, Indian Sugar Mills Association (ISMA), the apex industry body has directed mill owners to increase supply to regulate the rising price of sugar. 

“Immediately after receiving letter from the government, ISMA circulated the same amongst its members with an advice to try their best to control sugar prices and ensure that adequate supply is done in the market. We also discussed the same with our members in the recent managing committee meeting held in Chennai that mills need to ensure that the sweetener prices should not go up,” ISMA director general Abinash Verma told Business Standard. 

Concerned with rising sugar prices, the Ministry of Consumer Affairs on Friday had directed ISMA to request its member mills to take possible steps to increase the supply in market to curtail prices immediately. 

"While reviewing the sugar sector situation particularly domestic sugar price, it has been observed that the international sugar prices have fallen significantly in past few weeks whereas the domestic ex-mill price and retail price of sugar are in the upward trend, despite availability of sufficient sugar stock in the country. It is, therefore, requested to advise your member mills to ensure demand supply balance and also to ensure that the current upward prices are immediately curtailed," the ministry said. 

Sugar prices had on Thursday hit three months highest at Rs 4,050 a quintal in spot wholesale market at Vashi, the nearest Agricultural Produce Markets Committee (APMC) from Mumbai. Following similar move, the M-grade sugar contract for delivery in July hit the upper circuit on the National Commodity & Derivatives Exchange (NCDEX), to trade at Rs 3,816 a quintal on Thursday. Sugar futures, therefore, offer a huge arbitrage opportunity, around Rs 250 a quintal , between far and near months. 

Sugar prices have softened thereafter with its prices slumped by over Rs 100 a quintal in spot as well futures markets. According to traders, average sugar prices continued to trade at Rs 3,650 a quintal in Vashi (near Mumbai) wholesale market. The sweetener, however, is quoted between Rs 3,600 and Rs 3,750 a quintal all across the country with a minor variation in some markets. 

“With a traded quantity of just 120-150 tonnes, prevailing price in futures cannot be a correct indicator for spot market and availability situations across the country. Hence, in our response to the government we had explained that prices in futures cannot be considered as a benchmark,” said an industry official on condition of anonymity. Meanwhile, the physical markets sell an average around 74,000 tonnes everyday comprising an annual sale of 27 million tonnes.  

Normally, sugar prices increase during this time around every year with festive demand from stockists. This year, however, is exceptional as stockists’ offtake was meager during the fortnight before the GST (goods and services tax) levy effective July 1. The pipeline inventory was empty. So, the offtake got doubled during the first fortnight of July resulting into price rise. During this period, however, supply god interrupted in and around Delhi due to the flow of kanwarias and also confusion about 5 per cent GST levy. 

“All these issues are shorted out now which is reflected in cooling of prices,” said Verma.