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Informist, Friday, Apr. 25, 2025

 

By Afra Abubacker

 

NEW DELHI – The sugar industry expects the government to ask mills to sell 2.35-2.45 million tonnes of sugar in May. This sales quota is only a tad higher than April, but significantly lower than last year's record levels. The quota for May is due by month-end, and it impacts sugar supply and prices. 

 

 

The Centre had set the sugar sales quota of 2.35 million tonnes for April, and the market now pegs the May quota at around 2.40 million tonnes, citing subdued but gradually rising demand for the sweetener in summer. "This quantity (2.4 million tonnes) matches anticipated demand even after factoring in seasonal spurt in demand," MEIR Commodities Chairman G.K Sood, said.

 

In May 2024, the government had asked mills to sell a record 2.70 million tonnes sugar to check prices during severe heat waves and the General Election. While mills had dispatched 29.0 million tonnes domestically in the 2023–24 sugar season (Oct-Sep), projections so far suggest domestic sales this year could dip to 28.0–28.5 million tonnes, Sood said.

 

The sugar sector is navigating complex market fundamentals this season--high inventories, a shortfall in production, and a slowdown in demand. "Sugar prices have been stable, indicating a balance between supply and demand so far, validating the view that sugar demand has taken a hit," Sood said. "Therefore, there is no need to match last year's (total sales) quota," he added.

 

The domestic dispatches were artificially high last year due to sugar smuggling and export of specialty sugar like pharma sugar, Sood said. Though exports were technically banned, these unofficial exports were leaking from domestic sales, inflating the domestic sales quota. According to trade consensus, some 700,000-1 million tonnes sugar was smuggled to Bangladesh and Nepal in 2023-24. Though raw sugar, refined sugar, white sugar, and organic sugar were restricted from exports, specialty sugars like pharma sugar were excluded. 

 

This year, however, the Centre has reopened sugar exports. As of Apr.8, mills have dispatched 287,204 tonnes sugar and contracted over 730,000 tonnes, according to Praful Vithalani, chairman of All India Sugar Trade Association.

 

With an opening stock of 8.0 million tonnes and an estimated sugar output of 26.4 million tonnes, the total sugar availability in 2024-25 is seen at a comfortable 34.4 million tonnes. India needs about 28.0 million tonnes for domestic consumption, according to the Indian Sugar Mills & Bio-Energy Manufacturers Association.

 

Despite an 18.4% on-year drop in sugar production as of mid-April, the government appears comfortable with current price levels and stock availability. It has not closed sugar shipments out of the country and has permitted 1 million tonnes of exports in the current season ending September.  

 

However, the government has been releasing monthly sales quotas lower on year since the 2024-25 season started in October. Sood observes that the supply was cut to match the slowdown in demand. "The government has lowered sales quotas this year to match sugar demand. But it has incidentally helped build reserves," said Sood. "Demand from FMCG companies has also been weaker than expected."

 

"Sugar prices should have increased based on sentiment of lower sugar production. But prices are largely stable due to a slowdown in demand," said an official from the National Federation of Cooperative Sugar Factories. 

 

On pricing, market participants say rates are unlikely to see a sustained rally in the coming month. "If the May quota is lower than expected, we may see a short-term spike of INR 20–30, but the market won't absorb a steep rise," Naresh Gupta, a north-India based trader said. Currently, ex-mill sugar rates are around INR 3,750-INR 3,990 in Maharashtra and INR 3,900-INR 4,050 in Uttar Pradesh, traders said.

 

As the summer demand cycle unfolds, the focus will be on how closely the government aligns the May sugar sales quota with market expectation as it adjusts to ample supplies and slower demand.  End

 

Edited by Deepshikha Bhardwaj

 

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