India creates sugar buffer stock of three million tonnes to stabilise prices as output leaps

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India has created a buffer stock of three million tonnes of sugar in its effort to stabilise domestic sugar prices and allow sugar mills to improve liquidity to clear cane payment arrears to farmers as production leapt much beyond consumption, a government minister said.

C.R. Chaudhary, junior minister for consumer affairs and public distribution, told parliament that the government had agreed to reimburse the carrying cost of Rs 1175 crore towards maintenance of the buffer stock.

“Further, in order to prevent cash loss and to facilitate sugar mills to clear cane dues of farmers in time, the government has also fixed a minimum selling price of sugar at Rs.29/kg for sale at factory gate in domestic market, below which no sugar mill cane sell sugar,” the government statement quoted the minister as saying.

Sugar production in India in the current sugar season is estimated to be about 32.2 million tonnes, which is much higher than the estimated consumption of 25 million tonnes.

The excess sugar production during the current sugar season has adversely affected the market sentiments due to which the ex-mill sugar prices in the domestic market have fallen sharply and came down in the range of Rs 24.50 to Rs. 26 per kg in the month of May, 2018.

However, the minister said, the ex-mill prices of sugar has improved to Rs. 31 to 33 per kg as a result of various interventions including creation of buffer stock and fixation of minimum selling price of sugar.

This has helped improving the liquidity position of sugar mills thereby reducing cane price arrears from the peaked level of Rs.23,232 crore to about Rs.16,028 crore on State Advised Price basis, Chaudhary told parliament.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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