ChiniMandi predicted it, government acted: Sugar market finds stability – Editorial by Uppal Shah
ChiniMandi’s earlier call for better sugar supply management has been broadly vindicated as the Government introduced stock limits, fortnightly quotas, mandatory dispatch timelines, physical stock verification and duty-free raw sugar imports. These measures have contained temporary supply tightness, while fresh crushing and imports are expected to improve availability.
There are moments when an editorial is not merely an opinion but a reflection of what is actually unfolding in the market. The developments in the sugar sector over the past few weeks are one such example.
On July 17, ChiniMandi reported that the Centre was likely to impose a fortnightly sugar quota and a dispatch mechanism to keep a check on rising sugar prices. We had also reported that the Government could permit duty-free import of 1 million tonnes of raw sugar to augment domestic availability.
Two days later, on July 19, in my editorial, ‘Sugar Market Needs Better Supply Management, Not Panic Measures’, I had highlighted that the market did not need panic measures but better supply management. I had also suggested that bulk consumers should not be permitted to hold sugar stocks beyond 15 days of their consumption.
I am happy to say that the Government has acted on several of these suggestions.
From September 1, bulk consumers will not be permitted to hold sugar stocks exceeding 15 days of consumption. This is a significant step because it addresses one of the key issues we had highlighted, ensuring that sugar remains available in the market rather than being locked up at the consumption end.
The situation was never about an absolute shortage of sugar. The concern was about supply tightening during the period leading up to the new crushing season and ensuring that sugar moves smoothly through the supply chain.
This is where the Government deserves credit. It has acted in a timely manner and, so far, has managed to keep the situation under control.
There is no shortage of sugar. However, given the expected tightness in supply until November, I also highlighted in my previous editorial that white sugar imports should be permitted to ensure a steady and uniform supply across the country.
The Government has taken a series of steps to improve the flow of sugar into the market, including imposing a stock limit of 400 tonnes on sugar dealers across the country from August 1 to November 30, 2026; restricting bulk consumers from holding sugar stocks exceeding 15 days of consumption from September 1; directing all sugar mills to ensure that sugar stocks are lifted by buyers within seven days of sale; conducting physical verification of sugar stocks at mills through joint teams of Central and State Government officials to monitor stock levels and ensure adequate supplies; and after a gap of almost 10 years permitting duty-free imports of 1 million tonnes of raw sugar to further augment domestic availability.
The government has acted in a timely manner and has managed to keep the sugar market under control. The average sugar price, which was around Rs.40-41/kg earlier, is currently around Rs. 49-50/kg. The spike to Rs.67-70/kg was only temporary and lasted for approximately a week.
The Government also deserves appreciation for taking a tougher approach towards illegal stockholding. However, the government has shown increased strictness toward dealers by conducting raids, which we do not support, as general traders were not involved in hoarding. However, according to official sources, some of these raids uncovered large quantities of illegally hoarded sugar stocks. At the same time, if official inspections uncover large quantities of illegally held sugar, strict action is absolutely necessary.
The decision to restrict bulk consumers to 15 days of consumption has already started influencing market behaviour. Bulk consumers have disposed of stocks at destination prices of around Rs.4650-4800 per quintal, in some cases even below prevailing ex-mill prices. Maharashtra ex-mill prices are currently around Rs.4900-5100 per quintal.
The sugar market has moved somewhat higher from the levels at which it was trading earlier. Millers have been demanding higher sugar prices and an increase in MSP, citing production costs of around Rs. 42 per kg. Their concerns cannot be dismissed. Sugar mills need sustainable realisations to remain financially healthy and to ensure timely payments to farmers.
But the market also has to recognise that prices today are already around 15 per cent above that production-cost level. Therefore, there is little justification for another sharp upward movement simply because the market has become temporarily tight.
From the Government’s perspective, maintaining stability at the current level should be the priority. Mills should continue ensuring adequate supplies in the Rs. 45-48 per kg range, rather than trying to push the market significantly higher.
According to sources, if mills once again attempt to push sugar prices significantly higher, a Maximum Selling Price (MSP) cap may be imposed at the ex-mill level. Nobody wants to see the Government forced into such intervention, and therefore the responsibility lies equally with the mills to maintain adequate supply at reasonable prices.
Another important factor is the fresh supply that will start arriving soon. Sugar mills in Maharashtra and Karnataka are planning to commence crushing from October 15. This means fresh production will begin entering the market at a time when the current supply situation needs additional support.
The Government has decided to introduce a fortnightly sugar allocation system from September, replacing the existing monthly quota system. Under the fortnightly quota, mills will be required to sell at least 40% of the allocation in the first week and remaining quantity in the succeeding week.
The Government has already given permission for this early crushing, and sugar produced in October will not require a separate release order. For September, the monthly release will come in two installments. Refined sugar processed from raw sugar currently lying at ports will also add to domestic availability.
All these factors point towards the same conclusion: the current tightness is manageable and temporary. There is no reason for the market to panic.
This is also why ChiniMandi had argued for better supply management instead of panic measures. The Government’s subsequent actions have broadly vindicated that position.
The Government has managed the situation reasonably well. It has taken a series of proactive measures to ensure adequate availability of sugar and prevent artificial tightening of supplies in the domestic market.
The Government should therefore be applauded for ensuring that the temporary supply tightness did not turn into a prolonged market disruption.
At the same time, the job is not over.
The industry has to understand that a stable market is ultimately in everyone’s interest. A sudden spike may benefit a few players in the short term, but it creates uncertainty for consumers, attracts unnecessary regulatory intervention and can damage the credibility of the entire sector.
If the market continues to trade around Rs. 45–50 per kg at the ex-mill level, that should be considered a reasonable and sustainable range under the current circumstances.
The episode also reinforces one important lesson: when there is enough sugar in the country, the solution to temporary tightness is not panic. It is ensuring that available stocks move efficiently through the supply chain.
ChiniMandi raised this issue when the market was beginning to tighten. The Government listened, acted and, importantly, prevented the situation from getting out of hand.
As an industry publication, we will continue to question policies when required and highlight concerns of the industry. But when the Government takes timely and effective measures, it is equally important to acknowledge it.
In this case, the Government has done that.
And the developments of the past few weeks have proved that ChiniMandi was right: “The sugar market needed better supply management, not panic measures.”
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Source : ChiniMandi
