Sugar prices have gone up by Rs 100 per quintal in the last 24 hours, and according to industry experts, they are likely to go up further by an additional Rs 50 per quintal in the next fortnight. According to traders, there has been a lot of speculation of the sugar cess being rolled back by the government which has not happened and this could lead to an increase in input costs for the industry which will be recovered from the consumer.
Prices were ruling at R3,800-3,850 (ex-mill per quintal) for small grade and R3,880-4,000 for medium grade ex mill on Thursday.
According to Mukesh Kuvediya, secretary general, Bombay Sugar Merchants Association, prices are likely to go up in the next 15 days by an additional Rs 50 per quintal as there will be a rise in demand. There has been an expectation of a rollback of the sugar cess which has not happened and reports of sugar production further going down to some 220 lakh tonnes is likely to push up prices.
The winter season is almost over and consumer demand is going to rise since consumption will go up. While the situation is likely to remain comfortable till September, what happens in the subsequent months is not known yet and this could lead to a rise in consumer hoarding in anticipation of prices going up further, Kuvediya pointed out.
“The general sentiment among retail consumers would be to stock up more sugar since consumption will be the highest during Diwali and crushing will start late either by October-end or start of November. What remains to be seen if there are any farmer agitations for cane prices which could again lead to problems,” he said.
Kuvediya said that the government should take precautions to keep a buffer stock of 10-15 lakh tonnes so that supplies remain normal during the festive season and prices remain in check.
However, he did not believe that the abolition of the subsidy on sugar to states at the rate of R18.50 per kg would impact sales and impact sentiment.
“The annual consumption is around 250 lakh tonnes and the government keeps buying from the open market. The onus is now on the state governments to give the subsidy so the sales are not likely to be impacted much,” he said.
In the Union Budget 2017-18 presented in Parliament on Wednesday, the government allocated R200 crore to clear pending claims under the PDS sugar subsidy scheme, while the Budget allocation is R4,500 crore for this financial year.