Sugar cos seek more time to clear free-sale quota.

NEW DELHI: The sugar industry has asked the government for a fortnight’s extra time to sell its quota of free sale sugar (FSQ sugar) for the month of June even as domestic sugar retails at prices much lower than the January-February price of Rs 40 per kg this year. Global sugar prices, meanwhile, dropped after a 10 day “winning streak” on speculation over imports as supply eases and prices are expected to mellow further.

In a letter to the food, PDS and consumer affairs ministry, the National Federation of Co-operative Sugar Factories (NFCSF) has maintained that the industry needs additional time of at least 15 days to sell the June quota of sugar since sales in the open market have been down based on poor demand from the cold drink and ice cream industry as well as other bulk consumers has been low.

For the month of June, the Centre, which has been battling a high food inflation of well over 16% for several months now, has asked mills to sell 17 lakh tonne of sugar in the open market. However, mills have only been able to sell around 25% of that.

The Centre has already relaxed stringent restrictions placed on the bulk consumers of sugar regarding importing a significant quantity of their needs instead of buying from domestic sugar. The restrictions were tightened earlier for bulk consumers after sugar production estimates were pegged at no more than 16 million tonne. But since then, estimates have been hiked manifold to around 19 million tonne, plunging global prices and tempering domestic prices somewhat.

To help the sugar industry, the food ministry is currently gearing up to cut levy sugar quantity from 20% to only 10% as was the case earlier. It also hiked the price of levy sugar to mills to around Rs 17 per kg compared with only Rs 12 per kg for the past several years.

Significantly, it is also considering the possibility of hiking import duty on sugar to allow the industry to recover some of its “losses” on production price per unit of sugar compared to the first half of the year.

But prices, after a 10 day high, dropped 1.6% for August delivery to $523.9 per tonne on the Liffe exchange. Raw sugar for October delivery, meantime, also slid 1.8% to 15.76 cents a pound on ICE Futures US in New York. High global raw and white sugar prices for a sustained period have meant that traders have stopped entering any fresh import contracts for some time now.

Less than half a million tonne of earlier-contracted sugar is expected to arrive in India between June and September while a total of around 5.5 million tonne of sugar (raw and white) equivalent to white sugar have been imported thus far.

Pressure, though, is mounting within the government to rethink on the issue of hiking import duties to as high as even 16% as is currently being considered by the food ministry. Apprehensions are that apart from preventing import of cheaper sugar into the country in the peak demand festival season starting September-October, the move will also lead to a hike of around Rs 5 per kg for consumers in that period.

Food inflation and food commodity prices are of high political sensitivity, especially in view of state elections in Bihar by the year end and speculation over early assembly polls in W Bengal next year.

Source : The Economic Times