Spot prices of sugar in the domestic market may rule firm in the next few days due to ongoing strong summer demand from bulk consumers despite government?s announcement of higher free-sale quota of 17 lakh tonne for the current month.

Spot prices of small grade (S-30) in Navi Mumbai wholesale market are ruling around Rs 1,498-1,550 per quintal while medium grade (M-30) prices are hovering around Rs 1,550-1,630 per quintal on continued local buying interest from outstation buyers. Sugar consumption normally increases during the summer season (April-June period).

There are some fresh enquiries from bulk consumers such as confectionery, ice cream makers and soft drink producers who buy big quantities in summer months, a local broker said. Sugar futures on the national commodity exchanges have declined marginally by Rs 15-20 per quintal in past two days on the news that the government recently announced 44 lakh tonne of free sale sugar supply for the current quarter (April-June 2008). The government has released 14 lakh tonne for May and 13 lakh tonne for June 2008.

Sugar April 2008 contracts on NCDEX were traded around Rs 1,427 per quintal (ex-Kolhapur) and May 2008 contracts were quoted around Rs 1,505 till 5.30 pm on Thursday. Spot price in Kolhapur market was quoted around Rs 1,490 per quintal.

?Futures prices have fallen marginally in last two days on higher free sale quota of 17 lakh tonne announced by government for the current month but free sale quotas for the next two months are lower than the market expectations. I believe speculators and stockists may hold some stocks which may influence the market at the month-end. I think prices may rule stay firm on steady seasonal demand as total supply figures are now known,? a local broker said.

The government also announced that sugar mills can sell 2 million tonne from buffer stocks during the May-September 2008 period but there is confusion in the market that there is no clarity whether it should to be sold compulsory or voluntary, sources said.

India?s sugar production has been revised downwards to 29.9 million tonne for 2007-08 from International Sugar Organisation?s earlier projections of 33.15 million tonne.