New Delhi, Aug. 26 Indian mills, primarily those in the North, are said to have contracted 4-5 lakh tonnes (lt) of imported raw sugar within the last couple of weeks at prices ranging from $510 to $520 a tonne, cost & freight (c&f).
Centre’s curbs
The move to import at well above $500-plus levels comes even as the Centre has been working overtime to keep domestic sugar prices on a leash. Recent measures in this direction include the issuing of an order last Saturday that extended stockholding limits, imposed on wholesalers and dealers, to bulk consumers of sugar as well.
Besides, the Centre has been putting pressure on the industry to supply more levy sugar for the public distribution system. It has sought a doubling of the levy quota from 10 per cent of mills’ production for the ensuing 2009-10 sugar season (October-September).
In addition, there are plans to raise the monthly quota of sugar for the 6.52 crore below-poverty-line families by 2 kg during the festival months of September and October, which would require mills to part with another 2.6 lakh tonnes (lt).
States’ move
If these were not enough, States have also gone on an overdrive.
In Madhya Pradesh, for example, district authorities have raided godowns belonging to Coca-Cola and Cadbury’s even before the new stockholding limits on bulk consumers are to take effect on September 12. Similar seizures have been reported from Maharashtra.
All these moves have helped cool down domestic prices.
In the last two to three weeks, wholesale prices in Kolkata (ex-Chitpur railway yard delivery) have eased from Rs 3,150 to Rs 2,900 a quintal, while benchmark S-30 sugar at Maharashtra’s Kolhapur market has fallen from its peak of Rs 2,965 a quintal to Rs 2,825 a quintal.
“It is surprising that in spite of all this, some mills have contracted raw imports at $520 a tonne c&f, which translates into a landed cost of around Rs 2,540 a quintal. If you add the cost of port handling, freight and processing, this sugar will cost nothing less than Rs 3,100 a quintal ex-factory in Uttar Pradesh (UP), against current realisations of Rs 2,950-3,000. It only means that mills are still bullish about future price movements,” a source pointed out.
But this optimism, according to sources, may backfire. “The peak demand for sugar would be during the festival months and with the recent restrictions, any further flare-up is unlikely for now. Once crushing for the new season begins from November, the scope for spikes is even more limited,” a source said.
Season output
The new season is expected to start with opening stocks of about 25 lt, not counting the estimated 30 lt of imported sugar already contracted or available for processing.
And with UP and other cane-growing areas recently receiving good rains, the country is unlikely to produce less than 150 lt of sugar during the season.
“Even assuming that there are no new import contracts, and production not turning out higher, there is enough sugar to meet the consumption requirement up to next July. The mills that have contracted imports at $520-530 a tonne seem to be over-reacting to reports of global raw prices soon crossing 30 cents-a-pound (against 22-23 levels), while underestimating the Government’s ability to control things at home,” the source added.
Source : Business Line