Govt for suspending futures trade in sugar

Also recommends stock holding limits on mills to check price rise

The food ministry has recommended suspending the futures trade in sugar and imposing stock holding limits on mills in view of rising prices as the festival season approaches.

Sugar traders and wholesalers already face stock holding limits. The NCDEX, an exchange where sugar futures are traded, has increased the buying margin to 45 per cent. Food ministry sources said sugar production was expected to decline in the season starting October and “a need was felt to increase supply to the open market to control retail prices”.

The retail price of sugar has risen to Rs 40-42 a kg, Rs 3-5 a kg higher than three months ago, on fears of a shortage. Traders feel sugar production in the 2016-17 season may be lower than the previous year’s 25 million tonnes. According to the Indian Sugar Mills’ Association, sugar stocks with mills were 13.5 million tonnes in June, lower than the 18.1 million tonnes in April. Food ministry officials believe mills are holding on to stocks, expecting prices to rise during the festivals.

The ISMA said the ensuing sugar season would start with an opening stock of 7.1 million tonnes and end with a closing stock of 4.3 million tonnes despite production estimates being lower at 23.2 million tonnes. A trade representative said the government should withdraw the cess of Rs 1,000 per tonne to recover the production-linked export subsidy for sugar. This would help reduce the price of sugar because exports were not taking place now, he added.

The trade representative quoted above also suggested allowing import of raw sugar under advance licence. Sugar imported under this arrangement must be exported after refining within six  months, but the representative said this period could be extended to 36 months so that sugar could be sold locally during scarcity. The NCDEX raised the margin on the buy side for sugar significantly late last evening. The exchange said the total buy side margin would be raised to 45 per cent and the sell side margin to 15 per cent from Thursday to discourage long-buy positions in sugar futures.