5 days ago
Sugar prices fall at mills, retail relief expected before festivals
Sugar became much more expensive in shops recently.
Now the price charged by sugar mills has fallen sharply.
Shop prices may also fall during the next two weeks.
The government allowed duty-free imports of 1 million tonnes of raw sugar.
It also acted against hoarding and limited how much sugar large food companies could store.
Food companies worried that the storage limit could interrupt their production.
The government later allowed them to refill stocks on a rolling basis.
Officials say the country has enough sugar and that speculation helped push prices higher.
Ex-mill sugar prices fell nearly 20% in a week to about Rs 5,000 per quintal in Uttar Pradesh and Rs 5,300 in Maharashtra.
The Centre allowed duty-free imports of 1 million tonnes of raw sugar and launched measures against hoarding and speculation.
Retail sugar averaged Rs 64.1 a kg on Friday, 39% higher than a year earlier and 31% above the previous month.
The government said sugar supplies remain adequate and attributed the recent price spike mainly to hoarding and speculation.
From September, mills will follow a fortnightly allocation system requiring them to sell 40% of their allocation in the first week and the rest in the second.
- Who
- The Centre, the food ministry, sugar mills, food companies and consumers are involved.
- What
- Factory-gate sugar prices have fallen sharply, and retail prices are expected to ease soon.
- Where
- The price declines were reported in major producing states, including Uttar Pradesh and Maharashtra, with retail prices monitored nationwide.
- When
- Ex-mill prices were reported on Friday; retail relief is expected over the next fortnight, with the new allocation system beginning in September.
- Why
- Government measures, including duty-free imports, anti-hoarding action and changes to inventory and allocation rules, have eased supply concerns and speculative buying.
Government position
Food industry concerns
Sugar inventories
Government position
The government said inventory controls would discourage hoarding and speculative buying while supplies remain adequate.
Food industry concerns
Food companies initially opposed the 15-day inventory cap, saying it could disrupt production because they generally hold at least a month’s supply.
Restoring supply flow
Government position
The government introduced fortnightly allocations and required mills to release sugar progressively to improve market availability.
Food industry concerns
Food companies were cautious about longer-term supplier contracts because the restrictions created uncertainty over their ability to maintain stocks.
Price increase causes
Government position
The food ministry attributed the recent spike mainly to hoarding and speculation rather than an actual shortage.
Food industry concerns
Food manufacturers focused on the impact of high sugar prices on input costs for products such as syrups, juices, soft drinks and biscuits.
Key facts
- Ex-mill price in Uttar Pradesh
- About Rs 5,000 per quintal on Friday, down from roughly Rs 6,500 the previous week.
- Ex-mill price in Maharashtra
- About Rs 5,300 per quintal on Friday, down from roughly Rs 6,500 the previous week.
- Average retail price
- Rs 64.1 per kg on Friday.
- Year-on-year retail increase
- 39%.
- Duty-free imports
- The Centre permitted imports of 1 million tonnes of raw sugar.
- New allocation schedule
- Mills must sell at least 40% of their allocation in the first week and the balance in the second week.
- Inventory limit
- Bulk industrial users were initially capped at 15 days of sugar stocks.
Quotes
Food ministry
Government ministry responsible for food policy and sugar-market measures
“The downward trend in ex-mill and retail prices reflects that the sharp spike in prices witnessed recently was primarily on account of hoarding and speculation although the country carries adequate stocks of sugar.”
financialexpress.com
“Given the normal transmission of changes through the supply chain, retail prices are expected to follow the downward movement in ex-mill prices shortly.”
financialexpress.com
Raghav Jadli
President of the All India Food Processors’ Association
“Easing of sugar prices will mean that firms may not have to deal with runaway costs.”
financialexpress.com
Sources
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