The food ministry has stipulated sugar quantities that mills have to keep with themselves. The objective is to prevent a glut resulting in a fall in prices, according to a notification issued on Thursday. “The government fears that if sugar prices fall too much, the sugarcane arrear may also go up, leading to farmers’ unrest. To avoid such a scenario, the food ministry has approved a plan that will make it mandatory for each sugar mill to keep certain quantity with itself, which in fact will also determine a maximum quota the factory can sell in the market,” a source said. According to the plan for this month, each sugar mill will have to keep with itself 83% of the closing stock as on January 31, and cannot sell any quantity produced in February, the sources said. Similarly, the quota for March will be at 86% of the closing stock as of February 28 with the additional rider that no sugar to be produced next month will be released in the market.
This stock limit plan has been approved after the ministry found the industry demand to create a buffer stock not feasible after the implementation of the GST. The ministry was of the view that creating a buffer stock would entail subsidy and any such assistance was not possible since the Sugar Cess Act 1982 was abolished after GST came into effect in July 2017. “This is a similar provision like buffer stock, but without involving government subsidy,” an industry official said. Since there has been a competition among mills to sell sugar as much as possible after the industry associations revised upward the forecast of sugar production to 26.1 million tonnes from earlier estimate of 25.1 million tonnes for 2017-18 season (October-September).
The production is up around 29% from a year earlier, according to the estimate by the Indian Sugar Mills Association, against an annual consumption between 24 million tonnes and 25 million tonnes. The cane arrear (payment dues by mills to the farmers) as of January 25 was `7,826 crore against `8,982 crore a year ago.