Maha mills stuck with huge levy sugar
Government unwilling to lift 10 lakh tonnes stock as buyers go for cheaper open market sugar.
By TNN |
NEW DELHI: For the first time in 25 years, nearly 10 lakh tonnes of levy sugar is lying with mills in Maharashtra, unlifted by the government. For over six months now, there are no takers for the sweetener, given cheaper sugar in the open market.
That’s a whopping 75% of the total levy sugar which has lapsed. The state sugar industry is now desperately pushing for the food ministry to issue a directive allowing the sale of this sugar in the open market to generate some finances for the glut-hit industry. Prices for open market sugar in Maharashtra have plunged to lower than levy sugar prices, but the resources would come in handy for the industry to clear arrears to sugarcane farmers.
The situation has forced the industry and politicians to shoot off letters to the food and finance ministers pointing out that the release mechanism prevents sugar mills from selling levy sugar in the open market even in the current glut situation without prior permission of the Centre. An average of 2 lakh tonnes of levy sugar is allocated monthly to the state. However, there are no takers for the levy sugar in the face of cheaper open market prices.
What’s worse for sugar mills, the forthcoming crushing season of 2007-08 will mean shortage of space to store the levy sugar.
The industry is pushing for open market sale of some (at least 2 lakh tonnes) of the 10 lakh tonne of levy sugar lying with them. The Centre, millers said, should increase the quantity of release in the open market from the announced 13 lakh tonnes to 15 lakh tonnes for August and September.
The 2006-07 sugar season is estimated to have produced some 29 million tonnes compared to an earlier estimate of only 24.64 million tonnes, spelling an over one million-tonne surplus after accounting for domestic consumption. Higher stocks mean a downside risk to prices and commodities firms have pegged prices on the futures platform to Rs 1,200-1,300 per quintal.
“Rising production, stable demand and marginal rise in exports would augment ending stocks to 10.4 million tonnes in 2006-07 from initial estimates of 7.86 million tonnes,” analyst Amol Tilak of Kotak Commodities said.
The situation has forced the industry and politicians to shoot off letters to the food and finance ministers pointing out that the release mechanism prevents sugar mills from selling levy sugar in the open market even in the current glut situation without prior permission of the Centre. An average of 2 lakh tonnes of levy sugar is allocated monthly to the state. However, there are no takers for the levy sugar in the face of cheaper open market prices.
What’s worse for sugar mills, the forthcoming crushing season of 2007-08 will mean shortage of space to store the levy sugar.
The industry is pushing for open market sale of some (at least 2 lakh tonnes) of the 10 lakh tonne of levy sugar lying with them. The Centre, millers said, should increase the quantity of release in the open market from the announced 13 lakh tonnes to 15 lakh tonnes for August and September.
The 2006-07 sugar season is estimated to have produced some 29 million tonnes compared to an earlier estimate of only 24.64 million tonnes, spelling an over one million-tonne surplus after accounting for domestic consumption. Higher stocks mean a downside risk to prices and commodities firms have pegged prices on the futures platform to Rs 1,200-1,300 per quintal.
“Rising production, stable demand and marginal rise in exports would augment ending stocks to 10.4 million tonnes in 2006-07 from initial estimates of 7.86 million tonnes,” analyst Amol Tilak of Kotak Commodities said.
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