Govt rejects request to sell excess sugar stocks

The Indian government has defied a request to extend the deadline for biscuit and bread manufacturers to sell off excess sugar stocks, insisting they must release any surplus by August 31. The limit, recently reduced from 30 to 15 days, now necessitates bulk sugar users to hold no more than a fortnight's worth of their normal consumption.

During a meeting with the food secretary, some of the nation's largest firms expressed worry that selling their stocks immediately and repurchasing later could drive up sugar prices significantly, as well as potential difficulties in fulfilling export orders if supply chains tighten.

The government's decision comes after the Indian Sugar & Bio-energy Manufacturers Association (ISMA) accused bulk consumers of hoarding sugar. However, consumers have denied these allegations, asserting they engage in seasonal stocking based on production requirements and not resale or speculative trade. A senior executive of a prominent biscuit manufacturing company stated that they convert sugar into food products like biscuits and candies, which are consumed by the masses.

If they were to liquidate their hedged sugar now, they would resurface in the market strongly within 15 days, potentially pushing prices upward.

Several FMCG companies welcomed the government's move, believing it could reduce price volatility, which is more detrimental to their business than a steady increase in prices. They emphasized that maintaining stocks as per government norms is necessary due to their significant requirements. Sugar prices have reportedly decreased since the government's action, and the industry anticipates further price declines if bulk consumers adhere to the stock holding limit.

According to a senior sugar industry analyst, if bulk customers exceed the legal limit and liquidate their stocks, an additional 3-4 lakh tonnes of sugar may enter the market.

However, some analysts noted that MNC FMCG and pharma companies, who require special grades of sugar from approved mills, might face challenges in securing timely supplies. The industry body ISMA accused traders and bulk consumers of indulging in speculative buying, which created artificial scarcity of sugar in the market. The trade organization's shift of blame to its consumers has been criticized as unethical by some.

Recent raids on sugar traders in West Bengal have reportedly sent shockwaves through the trading community.