Sugar prices, futures up over decontrol

New Delhi (PTI): Sugar prices rose marginally both in wholesale and futures markets by up to `50 per quintal while shares of sugar firms surged up to 9 per cent following the government's decision to partially decontrol the sector.

On Thursday, the Cabinet Committee on Economic Affairs (CCEA) decided to give freedom to millers to sell in the open market and removed their obligation to supply the sweetener at subsidised rates to ration shops. Rating agency ICRA said sugar prices are likely to fall in the short term as mills would be free to liquidate their stocks to pay cane arrears to sugarcane growers.

The partial decontrol will have positive impact on sugar sector as the removal of levy obligation is likely to improve the profitability of millers, it said in a statement.

"The abolition of the monthly release mechanism would also benefit sugar mills in the medium to long-term by enabling them to manage their working capital requirements better," ICRA said.

Ponni Sugars Managing Director N Ramanathan said the decontrol will "improve the profitability and cash flow of the company" as it would be free to sell its sugar production without any quota restriction from now.

According to trade data, wholesale price of sugar rose by `50 per quintal to `3300-3400 in the national capital and same increase was seen in other parts of the country. Also, the futures price of sugar rose marginally on the NCDEX platform to `3,202 per quintal from `3,206 per quintal on Thursday. However, retail prices in most cities however remained stable on Friday, but experts said the impact of the decision on retail prices would be felt gradually in the coming days.

The retail price of sugar stood the highest in Mumbai at `38/kg followed by `37/kg in Delhi, `36/kg in Kolkata and `32/kg in Chennai, as per the data maintained by the Consumer Affairs Ministry.

Sugar stocks zooms

After a long wait, finally the Cabinet Committee on Economic Affairs (CCEA) cleared partial decontrol of sugar sector on Thursday, thus thrown open the sugar market, considered part of reform process which commenced last September.

Now the private mills need not sell 10 per cent of sugar produced to government at concessional rates. Industry expect sugar mills now can breathe little as they have no levy obligation for two years, the period the government set to observe the market.

After the dismantling the front-end restrictions, now the industry is hoping that the government will attempt even the back end part which Rangarajan committee had recommended. A For instance, the particular state governments are free to decide on the cane price and have to buy sugar in the open market to supply through PDS sale.