Govt mulls move to cut sugar stock limit further

The government is considering a proposal to further reduce the stock limit of sugar for bulk users, such as soft drink and ice cream makers, from the current 10 days to keep prices of the sweetener under check.

At present, bulk users cannot hold sugar stock exceeding 10 days of their requirement, if it is sourced from domestic market. However, there is no such ceiling on imported sugar.

According to sources, the Parliamentary Standing Committee on Finance had suggested that the stock limit period might be further reduced from 10 days after assessing the overall demand-supply position, sources said.

The food ministry is considering this proposal, they added.

In August last year, the government had issued an order imposing stockholding limit on large consumers of sugar, who use more than 10 quintals per month as raw material, to rein in the spiralling sugar prices.

Since February 2010, the stockholding limit has been reduced to 10 days. The notification, which came into effect on February 20, will be in force till August 18, 2010.

About 60 per cent of the country's total sugar demand of 23 million tonnes is from bulk consumers, like manufacturers of soft drink, ice-cream, biscuit and confectionery.

Besides lowering the stock limit, the food ministry is also considering the committee's recommendation of asking the bulk users to source their sugar requirement through imports to tide over any shortfall in the country, the sources said.

These two proposals have come at a time when the industry has written to the government to impose import duty claiming that the realisation cost of sugar has fallen below the cost of production.

The government has allowed duty-free import of raw and refined sugar from April last year to bridge the demand-supply gap. So far, over six million tonnes have been imported. The duty-free import is allowed till December this year.

Sugar prices in the retail market of Delhi have declined to Rs 35-36 a kg from Rs 48 in January this year.

India, the world's second largest producer and the biggest consumer, may produce over 17 million tonnes of sugar in the current season against 14.7 million tonnes in 2008-09 season (that runs from October to September).

Sugar output is expected to be near the country's annual demand of 23 million tonnes in 2010-11 season, according to the industry estimates.