Sugar sales by mills capped for 2 months

, ET Bureau|
Feb 08, 2018, 11.36 PM IST
Sugar-
Sugar prices had declined to Rs 28/kg from Rs 36/kg in October.
The central government has put a ceiling on the amount of sugar mills can sell by imposing significant minimum stocks for the next two months to check falling prices.

Millers have welcomed the decision, saying it will help further improve sugar prices, which have already jumped 3.5% since the government doubled import duty on sugar to 100% on Tuesday.

As per the new quota imposed on sugar sales, in February mills must maintain sugar stock of not less than 83% of the closing stock on the last day of January in addition to sugar produced in February, less sugar exported during the month. For March, sugar mills have to keep not less than 86% of the closing stock on the last date of February, in addition to sugar produced during March less sugar exported in the month.

BB Thombre, president of Western India Sugar Mills Association (WISMA), said the decision will help increase liquidity of sugar mills, enabling them to clear the cane payment arrears.

That is because sugar mills pledge their sugar with banks to take loans for operation and cane payment; and this loan is in proportion to the ruling market price of sugar. "As sugar prices increase, lending banks will upgrade sugar valuation, increasing liquidity of the sugar mills," Thombre said.

Sugar prices had declined to Rs 28/kg from Rs 36/kg in October. In a meeting held with the officials of the Prime Minister's Office (PMO) on Saturday, the industry —which has not yet officially updated its production estimates-—had appraised the government about the possibility of a major jump in sugar production in the ongoing sugar season.

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