New Delhi: Despite continued government efforts, sugar prices have touched a three year high, reflecting the demand supply mismatch in the commodity. Ex-factory prices in Uttar Pradesh, the country's second-biggest producing state, touched a three-year high of Rs.2,400 a quintal, up nearly 3 per cent from Saturday's close. Spot prices in Maharashtra, top producer of sugar, jumped 5.2 per cent to Rs.2,378 a quintal.
"Spot prices were responding to strong summer demand from cold drink makers," said an analyst at Religare Commodities. "Lower output estimates fuelled the upside further."
This price movement is contrary to expectations that rates would not be affected by the government's decision last Friday to waive the 60 per cent import duty for the import of a million tonnes of refined sugar by government agencies.
According to the latest projections by the Indian Sugar Mills Association (ISMA), the country's sugar output in the season ending September 30 is likely to touch a four year low of 14.5 million tonnes. This is a decline of over 45 per cent from the 26.5 million tonnes last season. The fall can be attributed to lower acreage under sugarcane and an over 10 per cent drop in recovery.
NOT SO SWEET
- February 2009 - Government allows duty-free import of raw sugar with export obligation
- March 2009 - Stock and turnover limit imposed on sugar for a four-month period
- March 2009 - April - June quarter market sale quota set at 5.4 million tonnes as against 5.2 million tonnes last year.
- April 2009 - 60 per cent duty waived on refined sugar import up to 1 million tonnes, export obligation on raw sugar optional.
However, alongwith the opening stock of 8 million tonnes and raw sugar imports of 1.5 million tonnes, the season's availability is estimated at 24 million tonnes against a consumption of 22.5 million tonnes. ISMA also expects next year's output to improve significantly as farmers have got timely payments.
The output decline is reflected in the market prices. In Delhi, the average retail price has touched Rs. 27 a kg, up 35 per cent since October.
The price rise has prompted continued government intervention since the commodity has a weight of 3.62 per cent in the wholesale price index inflation, more than cement (1.73 per cent) wheat (1.38 per cent) and just lower than iron and steel's combined weight of 3.64 per cent.
The industry, however, holds that these prices are necessary to make timely payment to sugarcane farmers so that they don't shift to alternate crops.
Sugar price has increased in tune with sugarcane prices. "We cannot dissociate the sugar price from the cane prices, "ISMA President Samir Somaiya said last month.
Sugarcane price in Uttar Pradesh increased by Rs. 15 a quintal to Rs. 140.
- Ajay Modi
(The Business Standard 14.4.2009)
