Mumbai: Sugar supplies in India in the open market in September may rise 100,000 million tonnes (mt) after the government said it will convert all unsold sugar as on 20 September from the dismantled buffer stock into levy sugar.
“The government shall be monitoring the prices in the open market closely and shall not hesitate to release additional sugar if prices show a sharp increase,” the food ministry said.
Stock pile: A warehouse in Mumbai. The government, which had set up two buffer stocks of sugar last year to help millers saddled with excess supplies, has already allowed sale of 1.2 million tonnes in the open market. Arko Datta / Reuters
Sugar prices at Vashi, a Mumbai suburb and India’s biggest wholesale market, gained 31% in the past six months amid forecasts of a lower crop in the year starting 1 October.
India is the world’s biggest consumer of the sweetener.The government, which controls the sector, is expecting additional 850,000-950,000 tonnes to be sold by millers from their allocated buffer stocks, an official release dated 1 September said.
While mills can sell 90% of their output at market rates, the government fixes the quantity and time of the sale every month.
Producers must sell 10% to the government at below-market prices for resale to the poor.
The government has already allowed sale of 1.2mt of sugar in the open market.
It had set up two buffer stocks of 2mt and 3mt last year to help millers saddled with excess supplies. The buffer was dismantled early this year.
Levy sugar is sugar purchased by the government at a lower than market price. The government distributes this sugar to the poor through a public distribution network. It has set aside 200,800 tonnes for sale to the poor this month, the ministry said.
In addition, government has said it may initiate penal action against millers, who were holding their dismantled buffer quota.
Abhishek Shanker is with Reuters and Thomas Kutty Abraham with Bloomberg.