The Central Government is thinking about imposing stock limits for sugar millers as well as restrictions on domestic sales by fixing a quota on each mill, with the aim to tame retail prices, currently Rs 43 a kg.
Food Secretary of the Country Vrinda Sarup reviewed the price situation on Thursday (28th July 2016) in a video conference interaction with sugar producing and consuming states. After the meeting a senior Food Ministry official told the media the sugar prices were discussed in the meeting. Prices are rising because of tight supply situation created mostly by holding of stocks by millers. The government is looking at imposing stock limits on millers too and reintroduces monthly release mechanism.
Sugar prices are expected to remain under pressure due to an estimated supply gap of 3.5-4 million tonnes in the next marketing year starting from the month of October, former Agriculture Minister Sharad Pawar said. As per Mr. Pawar sugar production situation is good this year. He also added that in 2016-17, there will be 3.5-4 million tonnes gap in demand and supply.
Other than West Bengal, there is a stock holding limit on a dealer or trader for up to 500 tonnes for all states at present. The limit in Kolkata for a dealer/trader and extended areas of Bengal is 1,000 tonnes. The official further confirmed that the ministry is also considering the idea of reintroducing a release order mechanism, under which the central government decided how much each mill will sell sugar in the open market. The release order mechanism was scrapped in the year 2013 when the sugar industry was partially decontrolled. To curb price hike in sugar, the government has recently imposed 20 per cent export duty on sugar and withdrawn cane production subsidy to the mills.
Sugar prices have shown upward movement as domestic production is estimated to drop to 23-23.5 million tonnes in the marketing year 2016-17 (October-September), as against 25.1 million tonnes in the current year. Earlier during the day, former agriculture minister Sharad Pawar said that the prices were expected to remain under pressure due to an estimated supply gap of 3.5-4 mt in 2016-17.
As a result of this news, the sugar companies spiked up considerably. Shree Renuka share price is trading at Rs 18.55, up by 5.70 per cent. KCP Sugar share price is trading at Rs 43.75, up by 7.10 per cent. EID Parry share price is trading at Rs 259.50, up by 4.55 per cent.
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