Centre imposes stock-holding limits on sugar mills

Mills can't hold more than 37% of total inventories as of Sept-end; limit would be 24% as of Oct 31

To ensure that sugar mills liquidate their inventories, the central government has imposed stock-holding limits on mills. In a notification issued on Thursday, the Centre said sugar mills should not hold stocks in excess of 37 per cent of their total inventories as on September 30, 2016, while as on October 31, 2016, no mill can have stocks above 24 per cent of total inventories.

Holding sugar in excess of this specification would attract penal action.

Sources said 50-60 sugar mills would be directly impacted by this order as they were holding stocks much more than the specified quantum."Among these, there are 15-20 mills which are holding stocks in excess of 80 per cent of their available inventories," sources added.

According to unofficial estimates, overall sugar stocks with mills at the end of September 2016 would be 7.3 million tonnes (mt), which could go down to 4.52 mt by the end of October 2016.

The total availability, according to the notification, would have to be calculated on the basis of total opening stock of sugar with the mill as on October 1, 2015 plus the sugar production in the 2015-16 season (October to September) less exports done by the mill during the year.

For example, if a mill had opening stock of 10 mt at the start of 2015-16 season and its production during the year was 5 mt, while it exported 3 mt. The total sugar available with it for calculation of the holding limit would be 12 mt.

Retail sugar prices have been rising in the past few months to reach Rs 40-42 a kg now. According to the government, sugar mills with the help of unscrupulous traders could further push up prices during the festival season, taking advantage of the supply shortage.

To prevent this, the government has unleashed a series of measures such as withdrawal of incentives on export, production of ethanol, and imposition of duty on exports.

India's sugar production is estimated to decline to 25 mt in the 2015-16 season from 28.3 mt in the previous year. The outlook for the next year is also not encouraging as sugar production is pegged lower at 23.26 mt.

However, some industry players feel there would be sufficient sugar stock to meet the domestic demand of 26 mt as the country would have an opening stock of 7 mt.