Stocking, speculation behind ‘unnatural’ sugar price surge: ISMA

The sugar industry's governing body, ISMA, has stated that there is no shortage of sugar, yet the recent prices surge is not natural and is being driven by "speculation" and stocking by bulk consumers. The industry body is advocating for a "rationalization" of retail prices and anticipates a reduction in coming days following government interventions.

Denying allegations of diversion of sugar for ethanol production, ISMA emphasized that only 290 crore litres of the total 1,200 crore litre ethanol supply came from sugar during the current ethanol supply year. ISMA President Niraj Shirgaokar noted that the price hike is primarily due to speculative behavior; traders created a false impression of scarcity, prompting large bulk buyers to stock up 1.5-2 months of supply ahead of time, thereby removing sugar from circulation.

Factors contributing to the price surge include lower-than-estimated production, adverse weather conditions, and pests affecting the crop. The millers received a high ex-mill price of Rs 58-59 per kg due to this artificial price hike, but now it is declining and will soon impact the retail market. ISMA projects a closing stock of approximately 35 lakh tonnes by the end of September, which they describe as a "healthy buffer" against normal domestic demand.

Government actions such as a duty-free import window, tightened stockholding limits, special crushing, and an early start to the new season are expected to bolster domestic supply and stabilize prices. When questioned about allegations of industry involvement in creating artificial scarcity, ISMA president stated that the industry did not create any such scarcity but acknowledged the possibility of some mills holding onto stocks, which the government is investigating.