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 201617 season (Oct-Sept) due to drought. So far, 6.6mt of sugar has been produced.