Govt may lift stock limit on bulk buyers of sugar next month

Taking into account the fall in sugar prices over the last four months and better production outlook for next year, the government may lift the stockholding limit imposed on bulk consumers of the sweetener in July.

At present, bulk users of sugar, such as ice cream and beverage manufacturers, are allowed to stock the sweetener for only 15 days of their requirement. "Now that sugar prices have come down, we can do away with the stock limit rule on bulk buyers. We will take a call on the issue in July," a senior Food Ministry official said.

"We have come out of a difficult price situation. We are much better off now," he noted.

The 15-day stockholding limit on bulk consumers was first imposed in August last year to curb demand for domestic sugar and control rising prices. Later, in February this year, the stockholding limit was reduced to 10 days as sugar prices touched nearly Rs 50 a kg in January.

The restriction on bulk users forced them to depend on imported sugar to meet their requirements. The stock holding limit was relaxed on May 21, and bulk consumers are now allowed to keep sugar stocks for 15 days again.

Food ministry officials attribute stockholding limits on bulk users as one of the major factors for bringing down sugar prices, which is now ruling at Rs 32 a kg in Delhi.

Industry body ISMA has also demanded that the restriction on bulk users be removed completely to boost the demand for sugar produced by domestic mills.

Sugar production in India, the world's second-largest producer but biggest consumer, is estimated to rise to 18.5 million tonnes in the 2009-10 crop year (October-September) against 14.7 million tonnes in the previous year.

However, the annual domestic demand is 23 million tonnes, and the gap is being met through imports. The country imported over six million tonnes of raw and refined sugar since February last year on the back of a duty-free regime, which is valid till December this year.

The production outlook for the next year is also very good with the industry and government both projecting that the output would outstrip demand. There is also a possibility that the mills would be in a position to fulfil their export obligation of about one million tonnes.

Mills had imported over two million tonnes of sugar in the 2004-05 crop year under the Advance Licence Scheme (ALS). Under ALS, they were obliged to export a similar quantity.