Declining sugar prices hit industry hard

Even as high inflation has drawn the attention of policymakers, declining prices of sugar, owing to excess supply, have hit the industry.

Sugar prices in most parts of the country, primarily north India, are now lower than production costs. According to sugar industry representatives, the ex-mill sale price of sugar stands at about Rs 33 a kg in the North, against the cost of production of Rs 34-36. In Maharashtra and Karnataka, at Rs 31 a kg, the price is just higher than the production cost of Rs 30 a kg.

To address this, millers have urged the Union government to allow them to sell sugar under the allocated non-levy sugar (sugar meant for sale in the open market) quota till May. Currently, they are allowed to sell the sugar until March.

In a letter to Food Minister K V Thomas, the Indian Sugar Mills Association (Isma) has urged the government just as it had allowed mills to sell non-levy sugar for October and November till December, a similar exercise should be carried out for sugar allocated for sale in December-March.

“In the last three years, on an average, the government released 9.04 million tonnes (mt) of sugar in the first six months of the crop year (starting October). However, in the 2012-13 season, it released about 10.8 mt, about 20 per cent more than the average, leading to a fall in prices,” Isma said.

Millers have also urged the government to expedite the process of allowing mills to sell their unsold levy sugar (sugar to be sold at ration shops) after six months, instead of the current practice of two years.

Currently, mills have to store the sugar the government doesn’t purchase for distribution through ration shops, for two years. However, millers have demanded if the government fails to purchase the entire quantity of sugar for ration shops from them, they should be allowed to sell it in the open market after six months. They have also demanded the price at which the government purchases sugar from mills for sale through ration shops be increased by at least 15-20 per cent. Currently, the price stands at Rs 19 a kg. “These steps would give some relief to the industry and it would be able to find buyers over a longer period,” millers said.