There is good news for those with a sweet tooth. Sugar prices have fallen in the last one month and are expected to remain low for the coming months.
The price of sugar in the retail markets in major cities have dipped Rs 1-4 per kg in the last one month while the rates have slumped by up to Rs 9 in some cities in the northeastern states, according to government data.
While industry sources claimed the retail prices would not to go beyond Rs 40-42 per kg till the 2017-18 sugar season ends in September, the government said the price trend of will be clear by February.
Enforcement of a cap on the stock limit for a longer period due to the Gujarat elections is said to be the major reason for the situation, which, millers said, has become “loss-making” for them.
“The picture will be clear by February how prices are going to move. However, prices this year should be at comfortable and reasonable levels for consumers to procure from the market,” Subhasish Panda, Joint Secretary (Sugar) of the Department of Public Distribution, told IANS.
Retail prices differ from place to place but the average price in the major cities is currently hovering around Rs 40 per kg and industry sources anticipate they could even fall to Rs 38 in the coming months.
In Delhi and Mumbai, the prices have come down from Rs 41 on December 14 to Rs 40 on January 14, as per the figures provided by the Consumer Affairs Ministry.
Similarly, the prices have decreased by Rs 1 in Kolkata, by Rs 2 in Chennai and by Rs 3 in Lucknow.
In the case of Gangtok, Imphal and Vijaywada, the dip is substantial as prices fell by Rs 9, Rs 8 and Rs 5, respectively, in just 30 days.
The current situation is against the fundamentals of pricing and retailers were making money, the sugar producers said.
Some of them held the government’s decision to put a cap on the stock limit for a longer time responsible for the dip in prices, which are leading to losses at the production level.
“The government could not lift the cap on the stock limit by the traders till December 19 due to the Gujarat elections. When it was removed, the festival season had almost come to end. Post-Christmas, the demand goes down,” said one miller, who wished not to be named.
The cap restricted traders from storing over 500 tonnes, Similarly, there was a cap on the mills — not over eight per cent of total production in October and 21 per cent in November.
According to the National Federation of Cooperative Sugar Factories (NFCSF), sugar production this year has been better as about 501 mills across the country have produced 125.20 lakh tonnes of sugar till January 10, as against 97.40 lakh tonnes during the same period last year.
The demand from the market has slowed down, causing lower returns to the sugar mills.
At present, the ex-mill sugar realisation ranges between Rs 3,000 to Rs 3,350 per quintal at the national level, while the production cost is about Rs 3,400 Rs 3,500, millers said.
Notably, the ex-mill price was above Rs 3,500 per quintal till the cap on the stock limit was in force.
The government is expecting the sugar industry would recover as demand increases in due course of time, but the millers are saying otherwise.
According to the people from the industry, the demand was likely to increase in the Indian peninsular region in March and in the northern parts of the country in June as sugar consumption goes up during summer.
However, it would not have much impact on the prices owing to the prediction of higher production in 2017-18, they said.
“The prices will range between Rs 38-40 at least till October. Even if there is a surge, it will not go over Rs 42 in major cities. The government is comfortable with it,” one miller said.
In 2016-17, the government was seen taking several steps such as the cap on stock limit and higher duties to arrest the price rise in the domestic markets in the wake of low production.