Quota sales boost prices by Rs 5-10 a quintal

Aarti Shetty

Mumbai, Jan 6: Contrary to fears, the recent announcement of the three-month free sale sugar quota (for January to March 02) announced December 27, 2001 has resulted in the sugar prices climbing up by around Rs 5-10 per quintal in the open market and not decline, as was expected. Normally, sugar prices slide after the quota is released especially because of higher availability of sugar in the market.

On December 27, one quintal of S30 (small) grade sugar was quoted at Rs 1,410 and a quintal of M30 (medium) grade sugar was quoted at Rs 1,468.

However, since the past one week, sugar prices have undergone an increase and currently S30 is quoted at Rs 1,410.5 per quintal and M30 is at Rs 1,470.5 per quintal.

One of the major reasons for the price rise in the open market, traders say is that the Government has decided not to allow the sugar mills to liquidate the entire quota at one shot in order to prevent sugar prices crashing down in the open market.

The mills had intended to sell their 3-month quota at one go, thereby raising maximum possible prices at the earliest.

However, the Government has announced a bifurcation with regard to quantity and the period of sale. Accordingly, mills have been allowed to liquidate only 50 per cent of their free sale quota within the first 45 days and the remaining 50 per cent in the next 45 days.

Says the managing director of the Maharashtra State Cooperative Sugar Factories Federation Ltd, P Naiknavare, "The industry had expected a crash in sugar prices, post the release of the quarterly free sale quota. The Government has taken a timely and a good decision, as sugar pricelines have not been adversely effected, contrary to the sentiments which prevailed in the market".

The new quota at 33.50 lakh tn (27 lk tns for free sale and 6.5 lk tns for levy) is seen lower from last year’s (January -March 01), quota of 34.26 lk tns (25.75 lk tns for free sale and 8.51 lk tns for levy).
However, mills have the benefit of demanding an additional 10 per cent (2.7 lk tns) of the free sale quota which can be sold in the second half of the quarter.

This step has been taken to enable mills to make pending cane payments speedily.

In mid-November 01, the Government had decided to switch over to quarterly release of free sale quota, from the then existing monthly quota release system. Sugar mills were also allowed to offload 10 per cent in excess of their quota.