The sugar industry is trapped in a net of regulatory measures announced by the government. On the one hand, traders are not lifting sugar due to stock controls imposed by the government despite mills having reduced prices, on the other hand, mills are under pressure to clear unsold stocks from their monthly quota by tomorrow. Failing which, sugar mills will have to divert that stock to levy quota which fetches much less price.
Mills have now only one option left to request the government to provide some relief. Sugar mills have approached the Union food ministry seeking reprieve from the conversion of free-sale quota into levy quota on their failure to comply with the recently imposed weekly release order. Traders, mills claim, have cut down sugar purchase after the recent government action in order check prices.
The order, which was issued on April 16, requires mills to sell half of the unsold monthly quota as on the said date by April 22 and the balance part by April 30. This is a change from monthly release mechanism to weekly mechanism. Mills have been instructed to strictly comply with the release order, failing which the unsold quantity will be converted into levy sugar and sold through the public distribution system (PDS). The realisation from levy sugar is just Rs 1,300-1,400 a quintal, way below the open market realisation of Rs 2,200-2,300 a quintal.
On March 12, the government had imposed stock-holding limits on sugar for traders.
“Even though prices are down by around 10 per cent since early April, traders are not coming forward to participate in sale tenders. Consequently, despatches are down by 50 per cent. The government has imposed various conditions on sale and stock limits. We have brought it to the notice of the government and requested it to remove trade limits and weekly release order,” said Prakash Naiknaware, MD of the Maharashtra State Cooperative Sugar Factories Federation.
The Uttar Pradesh Sugar Mills Association (UPSMA) too has written to the Union food ministry requesting it to reconsider the norms and not to convert the unsold stock into levy sugar. Most of the trucks that were being used for despatches have been requisitioned by the state authorities for parliamentary elections (which falls on April 23 and 30 in UP) and mills were not finding enough trucks to transport sugar, the association has said.
The government had initially made an allocation of 1.95 million tonnes of sugar for April. Last week, it made an additional allocation of 250,000 tonnes for the month. This was done to cap the price rise. Retail sugar price has jumped by 40 per cent to Rs 28 a kg since October as output is estimated to touch a four-year low of 14.5-15 million tonnes.
“Assuming that mills might have sold 975,000 tonnes by April 15, they would be left with another 975,000 tonnes to be sold in the remaining 15 days. After including the 250,000 tonnes of extra quota, the quantity comes to 1.22 million tonnes. It is not possible to sell this quantity in just 10 days since most mills received the order on April 20,” said an UPSMA official.
After the government announcement on April 16, the NCDEX May sugar futures fell by 4 per cent till today, closing at Rs 2,212 per quintal.
