The limit, recently cut from 30 days, requires bulk sugar users to hold no more than 15 days of their normal requirement. At a meeting with the food secretary, some of the country’s largest companies warned that selling their stocks now and buying from the market later could push sugar prices sharply higher. They also raised concerns about meeting export orders if supplies tighten.
If this stock comes back to the market by August 31, it can substantially suppress sugar prices, said trade officials. The move follows allegations by the Indian Sugar & Bio-energy Manufacturers Association (ISMA) that bulk consumers had hoarded sugar. Consumers have rejected the charge.
“We do seasonal stocking as per our production requirements and not for resale or speculative trade. I can prove that every kilogram of sugar purchased by us has been converted into food products like biscuits or candies,” said a top executive of a listed biscuit manufacturing company.
“We convert sugar into foods like biscuits, which are consumed by the common people. If we liquidate our hedged sugar now, we will come back to the market strongly after 15 days, which can put upward pressure on the prices,” he added.
Some FMCG companies are happy that the government action may reduce price volatility, which is more harmful for their business than the stable rise in prices.
Read more: Retailers, quick commerce companies limit sugar rush amid stock pain“We maintain stocks as per government norms. As our requirement is huge, even if we want, we cannot stock more sugar. Sugar prices have come down after the government action. This move will ensure that the speculative elements will be taken care of,” said Mayank Shah, chief marketing officer, Parle. The industry is expecting sugar prices to slide further if bulk consumers abide by the stock holding limit. “If the bulk customers liquidate their stocks above the legal limit, we can expect to get about 3-4 lakh tonnes of additional sugar in the market,” said GK Sood, a senior sugar industry analyst.
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A few analysts pointed out that the MNC FMCG and pharma companies, which need special grades of sugar from approved mills, may face challenges in securing timely supplies. Industry body ISMA had claimed that traders and bulk consumers had indulged in speculative buying creating artificial scarcity of sugar in the market.
“The trade organisation passing the blame to its consumers is beyond trade ethics,” said Sood.
The raids on sugar traders in West Bengal have sent shock waves in the trading community.