Govt to lift sugar stockholding cap; may raise duty if price fall persists

The government had in July raised the import duty on sugar to 50% from 40% to curb imports and stop building up of sugarcane arrears

With ex-factory sugar prices showing a downward spiral since the start of the 2017-18 crushing season in October, thanks to the expected bumper harvest, the central government is planning to discontinue the stockholding limit from December 31. It might also consider other measures, including further raising the import duty, if the decline in prices persists.

According to officials, while the removal of stockholding cap is almost decided, a final call on increasing the import duty is yet to be taken, as it involves consultation with other ministries as well.

The government had in July raised the import duty on sugar to 50 per cent from 40 per cent to curb imports and stop building up of sugarcane arrears.

Though there has not been much import into the country, international sugar prices have further softened since July due to a projected surplus. This has raised the prospect of imports.

“The softening of sugar prices globally has also opened the avenue for exports, despite 50 per cent import duty, so there could be a reconsideration,” a senior official said.

Until the middle of November, global sugar prices had already tumbled by almost 22 per cent in one year.

In the local market, ex-mill sugar prices in Uttar Pradesh, India’s biggest sugarcane-growing state, has fallen by almost Rs 300 a quintal since October 1, while in Maharashtra it has declined by around Rs 400 a quintal. UP and Maharashtra together account for over 80 per cent of the country’s annual sugar production.

Sugar production in the first two months of the 2017-18 crushing season, according to some estimates, has been around 4.72 million tonnes, which is around 1.2-1.3 million tonnes more than last year. The average recovery so far has been around 9.16 per cent.

Source: Trade and industry estimates

The Indian Sugar Mills Association (ISMA), in a statement released on Tuesday, said that output in October and November had gone up by 42 per cent to 3.95 million tonnes. ISMA has pegged the 2017-18 sugar output to be 25.1 million tonnes, against 20.2 million tonnes last year. It said sugar production during the October-November period reached 3.95 million tonnes, much higher than the 2.78 million tonnes in the year-ago period.

As many as 443 mills were operating until November this year, as against 393 mills in the year-ago period.

According to ISMA data, sugar production in Uttar Pradesh rose to 1.35 million tonnes until November from 0.84 million tonnes in the year-ago period. Similarly, the output in Maharashtra increased to 1.49 million tonnes from 0.94 million tonnes in the said period last year.

The current year started with an opening balance of around 3.87 million tonnes, which is the lowest in several past years.

“With the government clearly deciding not to continue with stockholding limit on traders beyond December 31, 2017, there will be buying interests to restock the pipeline, which will give a fillip to sugar offtake. If however, the government had withdrawn the stockholding limit earlier, demand would have improved the market sentiment,” ISMA said.