KOLKATA: Sugar prices which went up as high as Rs 34-36 per kg last week fell Rs 2 per kg over the past couple of days, mainly due to the absence of bulk consumers from the wholesale sugar market.
To stem the rising spree in sugar prices, the government while initiating a string of measures including allowing duty free import of raw sugar and refined sugar, has imposed a cap on stockholding of sugar by bulk consumers.
This has forced especially the soft drinks and biscuits producers to trim their bulk purchase of sugar from the market, which has somewhat temporarily eased its supply in the retail market, traders said.
However the market is not so sure about how long the price would be sustained at this level given the sugar shortage, estimated at about 9 million tonnes. Even as the government, as per its latest decision, starts importing sugar to bring down its price below the psychological level of Rs 30 per kg, it has to provide a huge subsidy for buying the sweetener at a very high level, an industry official said.
Anticipating India's huge import requirement in the aftermath of domestic sugar production plunging to 14.5 million tonnes in the 2008-09 sugar season (October-September) against its domestic demand of 23 million tonnes, refined sugar prices in the global market has shot up 60% to $610 per tonne in August 2009 from a level of $380 per tonne in October 2008.
This has put paid plans of soft drinks and confectionery producers to go in for imports to meet their requirements.
On the home front, the domestic sugar industry will feel the pressure to lower their ex-mill sugar prices below Rs 25-26 per kg with cost of production, too, shooting up substantially in the wake of the recent revision in sugarcane prices, which have increased more than 30-40% in different sugar producing states, he said.
Though the Centre has increased the statutory minimum price (SMP) for sugar to around Rs 108 per quintal for the 2009-10 sugar season, sugar mills have to pay for sugarcane to the farmers at the state advised prices (SAP), which are also 30-40% higher than the SMP. But, following shortfall in sugarcane output due to drought-like situations, sugar mills may have to pay more than the SAP to buy sugarcane from farmers, which are expected to rise above Rs 150 per quintal in the coming sugar season, he said.
Source : The Economic Times