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Govt fixing sugar release quota for mills to arrest falling prices

Govt fixing sugar release quota for mills to arrest falling prices

February 8, 2018

 

The Centre is looking to cap the amount of sugar mills can sell in the open market. This is to prevent sugar prices from falling sharply, which, in turn, would help mills in making sugarcane payments quicker to farmers. “There was a stockholding limit on sugar mills, which has been reworked,” a senior government official said.

 

Sources said new orders on this would be issued soon. According to them, mills have to hold at the end of February 83 per cent of the sugar stock with them on January 31, and at the end of March, the sugar stock with them will be 86 per cent of what they had on February 28.

 

In other words, the government has set the quantity of sugar that can be released in the market by mills and the limit will vary from unit to unit. Abinash Varma, director general of the Indian Sugar Mills Association, said: “The government move will help improve market sentiment because there will be some control on excess sugar supplies and that, in turn, will help improve falling prices.”

 

The move comes days after the government doubled the import duty on sugar to 100 per cent, from the existing 50 per cent to check cheap imports from Pakistan, which is giving subsidies to exporters. In September 2016, the government had for the first time imposed a stockholding limit on sugar mills.

 

Then, according to an official notification, mills weren’t allowed to hold stocks in excess of 37 per cent of their inventories as on September 30, 2016, while as on October 31, 2016, they weren’t allowed to have stocks more than 24 per cent of their inventories. That order had said holding sugar in excess of that would attract punitive measures. This is likely to be the case this time too, according to the official.

 

Such limits were in existence before 2012, when the release mechanism prevailed. Another issue, according to a veteran industry observer, is that even during the days of the release mechanism, some millers were getting court orders to release more sugar. This is possible this time too. However, the calculation made for setting this limit, according to sources, is that all mills put together will be able to sell 2 million tonnes of sugar in February and March, which is the estimated demand during this period.

 

Source:http://www.business-standard.com/

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