The food ministry has imposed limits on stocks sugar mills can hold during September and October, in a bid to discourage hoarding and curb any potential price rise during the festival season. Food minister Ram Vilas Paswan tweeted on Tuesday the stock limit for September has been fixed at 21% of the total sugar available with the mills during entire 2016-17 marketing year (October 2016- September 2017) and that for October is kept at 8%. Paswan, however, insisted: “There is no shortage of sugar for domestic consumption in the country.” Although the government had removed a release order mechanism (through which it used to control the sale of sugar by mills every month) as part of its move to decontrol the sugar sector in 2013, it resorted to imposing temporary restrictions on stock piling by mills during the festival season last year as well.
The government has already extended stock limits on sugar traders by six months until the end of October. Such a move enables state governments to impose stock limits and licensing requirements in respect of sugar, if needed, to curb hoarding and control prices. Sources had earlier told FE that to prepare for any potential shortage of sugar during the festival season, especially in southern states, the government was considering allowing imports of 3-5 lakh tonnes of sugar at a concessional duty of 25%. This was mainly due to a fall in output in drought-hit Maharashtra, Karnataka and even Tamil Nadu in 2016-17.
An official estimate has pegged the country’s sugar production in 2016-17 (October 2016-September 2017) at 202 lakh tonnes and consumption at 244 lakh tonnes. However, since the country had as much as 77 lakh tonnes of stocks from 2015-16 and raw sugar to the tune of five lakh tonnes has already been imported due to a relaxation offered by the government earlier this year, the carry-forward stocks from this season to the next will be to the tune of 40 lakh tonnes. This can meet consumption for less than two months. This means there are enough stocks for the country as a whole to meet demand until mid-November by when fresh production will have flooded the market.
Still, thanks to regional disparity in production and given that Maharashtra, Karnataka and Tamil Nadu have witnessed a drop in output this year, the government doesn’t want to take the risk of any shortage for even one-two months in southern states. Earlier this year, the government had approved duty-free imports of only raw sugar up to five lakh tonnes under OGL in anticipation of a shortfall. Later, as prices stabilised, the government even raised the import duty to 50% from 40% to discourage further imports through OGL to prevent any adverse impact on the ability of mills to clear cane arrears.