Control regime may return to sugar sector
Sugar prices in retail markets are rising on falling output, giving a fresh headache to the Centre. If prices go beyond Rs 45 a kg, the government may well ask mills to release a fixed quantity of the sweetener every month.
Mills selling a fixed quantity in open markets is the best option as of now to control prices.
“In short-term, this is the only option to control prices if sugar moves beyond a certain level,” an official said. Even if it is imposed, it will be temporary to bring down the prices, he added.
Measures like a ban on futures trading or scrapping the 40 per cent import duty will not have any immediate impact.
In July-August last year, the food ministry had requested for a ban on sugar futures. Market regulator Sebi, however, did not agree with this and it increased the trading margin to 65 per cent. It has since been lowered to 25 per cent from December 2016.
The UPA government in 2013 had abolished the mo­n­thly release order mechanism under which each mi­lls were to sell a fi­x­ed quantity in the open market every month. “This is not returni­ng to the control regime. It can be tried till prices cool,” an official source said. This step will ensure that a minimum quantity is available in the market, the source said.
In July last year, the government had considered a plan to revive the mon­thly sa­les quota system, but it was abandoned after industry opposed the move.
When retail price went up to Rs 45 a kg in Delhi in April 2016, the government had imposed a stockholding limit after which rates stab­il­i­sed at Rs 40 a kg. Under the stockholding lim­it, whi­ch is still in operation, states are powered to put curbs and a de­aler or trader can keep a ma­ximum of 500 ton­nes. But the limit in Kolkata is 1,000 tonnes.
According to the consu­m­er affairs ministry data, retail sugar prices have increased by Rs 1-2 a kg to Rs 42-43 in many places.
On the other hand, the Indian Sugar Mills Association has said sugar prices will be stable next year. Th­ere would be adequate su­gar to meet the local demand and there would not be necessity to import.
The sugar industry has asked the government to restructure debt, estimated at about Rs 50,000 crore, and extend interest subvention on soft loans for another 3 years. Both private and cooperative sugar mills along with ex-food minister Shar­ad Pawar met finance minister Arun Jaitley on Tuesday and discussed the issue.
Sugar output is expected to fall for the second straig­ht year to 22.5mt in 2016-17 season (Oct-Sept) due to drought. So far, 6.6mt of sugar has been produced.