Ex-mill sugar prices have declined by around 20 per cent in recent days, while retail prices have also started easing, following a series of measures by the government to improve market availability and curb hoarding and speculative stocking.
The government said there is no shortage of sugar in the country and that adequate stocks are available to meet domestic demand, including during the upcoming festive season. It said the recent spike in prices was primarily driven by hoarding and speculation rather than any underlying supply shortage.
A nationwide physical verification of sugar stocks at mills has confirmed comfortable availability. In several cases, mills were found to be holding stocks higher than the quantities declared in their monthly returns submitted to the government.
The verification exercise also found instances of mills resorting to short selling, under which they sold less sugar than the quantity allocated to them under the monthly quota. The government said such practices can unnecessarily restrict market supplies despite adequate physical stocks.
Fortnightly quota system from September
To ensure faster movement of sugar into the market, the government will replace the existing monthly sugar quota system with a fortnightly allocation system from September.
Under the new system, mills will be required to sell at least 40 per cent of their allocation in the first week and the remaining quantity in the succeeding week. The mechanism will allow the government to monitor demand and supply more closely, respond faster to changing market conditions, prevent artificial tightening of supplies and release additional quota whenever required.
The government has also directed sugar mills to dispatch sugar sold to buyers within seven days of sale. The measure, combined with fortnightly allocations, is aimed at speeding up the movement of sugar from mills to dealers and ultimately consumers while discouraging unnecessary accumulation and speculative holding.
Bulk consumers have also been advised against holding stocks beyond their operational requirements.
New sugar season expected to boost supplies
The government expects availability to improve further with the start of sugarcane crushing for the new season from October 15.
More than 10 lakh tonnes (LMT) of sugar is expected to be produced during October. Mills have been permitted to sell their October production without restriction so that the new-season sugar can enter the domestic market at the earliest.
Production is expected to reach around 45 LMT in November, providing substantial additional supplies for domestic consumption. Operational mills in Karnataka and Maharashtra are also expected to add around 2 LMT during September.
The government has additionally permitted refiners to sell converted sugar brought under the Advance Authorisation Scheme. Dealers and bulk consumers holding excess stocks are also offloading sugar, further improving market availability.
Retail prices expected to follow ex-mill decline
According to the government, retail prices have already begun declining and are expected to follow the downward movement in ex-mill prices as changes move through the supply chain.
The government said the combination of adequate physical stocks, faster dispatches, more frequent quota allocations and fresh-season production will help maintain a steady supply of sugar in the domestic market.
It reiterated that there is no shortage of sugar and assured consumers that necessary steps will be taken to ensure adequate and continuous availability at reasonable prices, particularly during the forthcoming festive season.
