Govt scraps sugar buffer stock on output worries

Concerned over the fall in output and slipping inventories, the government has scrapped the two-million tonne sugar buffer stock to enable the availability of adequate quantities in the market.

"There has been a significant decline in output leading to a deficit vis-a-vis consumption in the 2003-04 season. Carryforward stocks are required to meet the domestic demand. The buffer of sugar stocks has been done away with," officials said yesterday.

They said the buffer stock was created when there was a huge surplus of sugar with an over 10 million tonne carry-forward stock, but because of a drought-hit output of less than 15 million tonnes, stocks would dip to only around 4.5 million tonnes.

Mills were maintaining the buffer stock, while the government was reimbursing the storage, insurance and interest charge expenses of around Rs 1,300 a tonne.

The government's contention is that many mills may not have enough sugar to utilise their regulated release quotas, while maintaining a buffer at the same time.

Sources said buffer maintenance could only be possible if there was enough physical stock in the godowns, which at present did not seem to be the case.

"There is no doubt that stocks are there, but they are required for domestic consumption," they said. The message being sent to the market is that the government will not hesitate in releasing more and more sugar into the market to meet the domestic demand and keep prices under control.

Millers who got around Rs 1,300 a tonne on part of their stock will now be poorer by the same amount.