Indian sugar industry witnesses improvement in demand for sugar amid Covid-19

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The decrease in demand due to COVID-19 and the nation-wide lockdown reduced the consumption of sugar by around 10 LMT leading to lowering to revenue realisation of sugar mills and one of the reasons for building of arrears in the current season. With easing relaxations in lockdown norms, demand for sugar in India started picking up. The demand has been picking up predominantly because of sentimental buying by traders owing to the announcement of hike in Minimum Selling Price (MSP) of Sugar which the Government has taken into consideration. The industry has been seeking to realize maximum revenue from sales of sugar at MSP which currently is ₹3100/Qntl and should be increased to approx ₹3450 to ₹3500 according to various organizations. The hike in MSP will enable sugar millers to clear cane arrears and also improve operational profit margins compared to the current level. With demand picking and sentimental lifting by traders, prices have taken a rise too. A recommendation has also been made by NITI Aayog task force (TF) for a one-time hike in MSP of sugar from Rs. 3100/Qntl. to Rs. 3300/Qntl taking into account the Fair Remunerative Price (FRP) of sugarcane raised from 285/Qntl. to Rs.295/Qntl. for the 2020-21 season.

Today the prices of sugar have in various states have been in the range of ₹3150 to ₹3550
Maharashtra: S/30 Sugar rates from millers are ₹3150 to ₹3210/Qntl whereas ₹3210 to 3260
South Karnataka: The rates for S/30 are ₹3500/Qntl whereas for M/30 are at ₹3550/Qntl
Uttar Pradesh: The rates for M/30 are ₹3350 to ₹3450/Qntl.
Gujarat: The rates for New S/30 are ₹3251 to 3271 whereas M/30 are at ₹3281 to 3301/Qntl.
Tamil Nadu: S/30 Sugar rates are ₹3430 to Rs.3500 whereas, M/30 rates are ₹3500 to 3550.
(All the above rates are excluding GST)

According to market reports, millers are on a verge of completing the allocated quota of sale of sugar for the month of June 2020 along with the unsold quota of month of May that millers could sell till 30th June 2020. Itt is assumed that millers may have successfully sold out approximately over 75 to 80% of the quota i.e. accumulation of quota for the month of June 2020 along with the remaining quota of May 2020 and if the demand picks better pace, the quota that will be allocated in July 2020 may be sold as quickly and may turn the scenario the other way round leaving shortage for sugar stocks and prices surged.

In conversation with ChiniMandi News, Mr. Sanjay Khatal – Managing Director, Maharashtra State Cooperative Sugar Factories Federation Ltd. shared his views on the rise in demand for sugar. He said, “With the ease of lockdown norms, movement of goods have relatively increased and sugar has been left no behind. Demand has definitely taken a rise, however the surge in sudden demand that has been witnessed has been picking principally because of sentimental stocking by wholesalers and traders due to the probability of increase in MSP of sugar. As of now no spectacular buying has been witnessed from bulk buyers, institutional buyers. Though the summer demand has been killed due to the coronavirus pandemic, demand is yet likely to pick up pace since the country has reached the scenario of unlocking. Once hotels, restaurants, theatres, malls etc. open, the industry shall witness the actual demand coming in.”

Millers have been selling sugar stocks better compared to the months of March, April & May 2020. It is too early to predict the exact volume of quota sold, yet even if there is some unsold quantity with millers by the end of June 2020 it may not be too gigantic.” He added.

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