The Hindu Business Line : Sugar zooms in South

SUGAR prices in Tamil Nadu and Andhra Pradesh have spurted since Tuesday to touch new highs. The reasons: lower monthly releases for February, market sentiment, international prices, politics... take your pick, say those in the know.

Ex-factory prices in Tamil Nadu have gone up by 50-75 paise a kg to range around Rs 19.50 not counting excise, against Rs 18.90 on Tuesday. This will mean retail prices could go up to Rs 21 a kg.

In Andhra Pradesh too prices are at similar levels.

One reason is that the monthly release of free sale sugar for February has been slashed significantly in Tamil Nadu to about 6.66 lakh quintals against 11.27 lakh quintal in January. In Andhra Pradesh, it is 5.18 lakh quintals against 6.95 lakh quintals. For Karnataka, the release in February is about 10.84 lakh quintals compared with a 12.79 lakh quintals last month.

Sugar mills are buoyant with this price increase, which comes just ahead of the peak demand season in summer. Demand from bulk buyers, the manufacturers of beverages, will be picking up over the next two months and the prices are bound to hold at these levels, they say.

But sugar millers say the situation in the South cannot be seen in isolation. Prices in Tamil Nadu ruled around Rs 16.50 in December, much lower than elsewhere; now it is more in tune with domestic prices, say sugar industry sources.

International prices have touched record highs of $425-$430 a tonne and forecasts say it could touch $450. In the last 18 months, international prices have gone up from $300 to the current levels.

The Government is balancing the monthly releases because despite the production season being on, the stocks continue to remain low. It is even restricting the export releases only to the sugar mills with export obligation following raw sugar imports earlier, they said.

Another factor that boosts free market sugar prices in Tamil Nadu is the supply to the public distribution system. The State Government buys most of the sugar from the monthly free sale release quota of the cooperative mills and feeds it to the public distribution system.

For instance, of the nearly three lakh quintals that the cooperative and public sector mills are to sell into the open market, the Government buys about two lakh quintals for sale through the public distribution system. With availability lower in the open market it helps to boost the prices in the open market.