In a bid to discourage hoarding and keep sugar supplies steady, the government on Thursday decided to extend by six months the curbs on stocks of the sweetener a dealer or trader can pile up.
“The Union Cabinet has given its approval for extending the validity of the existing central order in respect of sugar for a further period of six months from October 29, 2016 to April 28, 2017,” the government said in a statement. The decision will enable states to issue control order with the prior concurrence of the Centre for fixing stock limits and implementing other licensing provisions in respect of sugar, whenever required, it added.
The Cabinet on April 27 had decided to introduce, after a gap of close to five years, the stock-piling limits to ensure that sugar prices don’t surge due to manipulations by hoarders. Under this, each dealer or trader can stock up to 500 tonne in all states, barring parts of West Bengal. The stock-piling limit for a dealer in Kolkata and extended areas in West Bengal has been set at 1,000 tonne. Dealers can’t hold sugar for more than a month from the day of receiving the stocks, the food ministry said.
After remaining subdued in recent years and hitting a six-year low in early 2015, domestic sugar prices climbed around 40% since the last marketing year started on October 1, 2015 on fears that sugar output in 2015-16 could drop.
Also, according to an estimate by the Indian Sugar Mills Association, the country’s sugar output is likely to drop again, by 7% to 23.37 million tonne in 2016-17. However, ex-factory sugar prices have remained flat in the last 3-4 months. In UP, the ex-mill prices are ruling around R35,000 per tonne, while in Maharashtra, it is trading at R32,500 per tonne.
States are free to fix stock-holding limits as well as the period of holding sugar, but those can’t be higher than the caps set by the food ministry. In late 2011, the government had scrapped the stock holding limit on sugar due to plentiful supplies.
The latest move, however, comes as a setback for sugar mills that have witnessed losses for at least three years due to the fixing of cane prices at elevated levels, mainly by states like Uttar Pradesh (although even the price fixed by the Centre was too high to pay last year). Elevated debt levels have compounded their woes.
Earlier this year, the government imposed a 20% duty on exports of sugar to keep domestic supplies steady in anticipation of a drop in production in 2016-17. The government has taken a series of measures in recent months to curb a rise in sugar prices, including suspending an earlier order for the compulsory sugar exports of 3.2 million tonne and putting curbs on stocks held by mills in the festive season.