Sugar dips on high supply, low demand

Rates drop to Rs 17 a kg in Maharashtra and south India.

Owing to higher supply and lower demand, the domestic sugar market has become bearish. In Maharashtra and south Indian states, sugar prices have come down to Rs 17 a kg, while the price in the north was hovering just below Rs 20 during the weekend.

While sugar at Vashi's APMC market is quoting Rs 1,870-1,900 a quintal, it is selling in the range of Rs 1,885-1,890 a quintal in Chennai.

In the Kolkata market, sugar prices are quoting in the Rs 1,965-1,975 level. At the Mujaffarnagar market, the tag is between Rs 1,930 and Rs 1,960, according to the Indian commodity report of Suvidha Commodities eCOM.

"After Holi, there has not been a big change in price in the country. Now, the physical demand is low, while supply is high. Eventually, millers and resellers quoted lower prices last week. The prices are likely to go up in the coming days as producers are likely to hold their stocks in hope of more profits," an industry analyst said.

The M-grade sugar at the Mujaffarnagar market quoted in a lower range of Rs 1,945-1,970 a quintal in the weekend. At the Kolkata market, the commodity was available between Rs 1,990 and Rs 1,995 a quintal, while at the Kanpur market it was being traded at Rs 1,985-2,010 a quintal last week.

The bearish sentiment will further strengthen when the government increases the free-sale quota of every mill for the April-June quarter. Last year, the government asked mills to sell 35 lakh tonne of sugar between April and June, but this year the quantity is likely to be more.

Centre for Monitoring Indian Economy (CMIE) said, "We expect the rising trend in sugar prices to continue."

Increasing global prices and eagerness of sugar mills to fulfil their re-export obligation are also expected to add to the upward pressure on the domestic prices, it added.

"In case value-added tax is levied on sugar, it will not have any adverse impact on profitability of sugar mills, as the burden would be passed on to the consumer. This implies that the sugar prices would further rise in such a scenario," CMIE said.