Sugar prices slip 3% after govt imposes cap on stock limits

MUMBAI: Sugar prices may be under check despite a bullish outlook with domestic supply set to increase following raw sugar import and government���s decision to impose stocks limits.

Following the stock limit announcement on February 23, prices on the domestic commodity exchanges hit lower limit of 3%, while the stocks of sugar companies were down between 4.5% and 9% on Tuesday. Incidentally, commodity markets includuing sugar were closed on Monday for the Mahashivaratri festival.

On NCDEX, the most active March contract closed down 3% at Rs 2,116 per quintal after making a low at Rs 2,101. KN Rahaman from brokerage Way2Wealth says that despite bullish fundamentals traders must restrain themselves from going long for a week, as government is committed to check any price rise.

Government decided to impose restrictions on the quantity of sugar a trader can hold to check hoarding. Anticipating a rise in commodity prices, traders withheld stocks, thereby affecting prices.

This is one of the several measures the government is taking to check prices that are up by 25% in the past few months to Rs 2,300 per quintal levels from Rs 1,800 in October. The government had earlier announced duty-free imports of raw sugar with an obligation to export equal quantity only after two years.

According to SL Jain, director general of Indian Sugar Mills Association, prices will not go haywire as these measures will result in increasing the supplies. ���Prices will range between Rs 21 and Rs 23 per kg,��� he said. He also said a fall in prices industry will affect the industry .

However, Prakash Naiknavare, the managing director of Maharashtra State Co-operative Sugar Factories Federation said that margins of the sugar companies might be squeezed but they will not be at a loss since the cost of production is
still lower than the prevailing ex-mill price.