Higher sugar releases for October and November festival season has pushed millers into a corner, even as they have warned of a supply squeeze and spike in prices in December.
Last week, the Government allocated 40 lakh tonnes for October and November to meet higher demand and to keep prices under control during the peak festive months.
The allocation is higher by 5 lakh tonnes each for October and November.
The higher release has resulted in a price decline of about 10 per cent at the factory level. The ex-factory prices are row ruling at Rs 32-33 a kg as against Rs 36 a fortnight ago.
However, the drop in prices for the end consumer may take some more time.
“The non-levy quota is normally announced for three months, but the Government has done it only for two months. This indicates that they may not have enough sugar to allocate for December,” sources said.
By ensuring higher sugar releases, it looks like the Government has sought to compensate for the rise in other commodity prices such as pulses and wheat.
Balance sheet
The sugar opening balance for new sugar season starting October is pegged at 6 million tonne (mt) by the Indian Sugar Mills Association.
The sugar situation is delicately poised as production is expected to be lower in 2012-13 with scanty rains hurting cane crop in Maharashtra and Karnataka.
The Government estimates sugar production to drop to 23 mt in 2012-13 from 26 mt last year, while ISMA has pegged the output at 24 mt.
The crushing for the 2012-13 season has started in States such as Karnataka, where some mills in the southern part have started operations.
However, millers in the main producing States of Uttar Pradesh and Maharashtra were expected to start by the middle of November.
Imports
A section of the industry believes that the country will have sufficient sugar to meet the December demand while downplaying the need to go in for imports.
However, millers in Maharashtra and the South feel that it is the right time to decide on imports.
Sugar production from the new season will start flowing by early December.
“UP has traditionally diverted cane to gur and khandsari. We will have to see how much sugarcane gets diverted this year,” sources said.