look news india
Across the country, the common man’s kitchen budget is once again being hit by inflation. An unexpected rise has been recorded in the prices of sugar, the most important commodity of daily use, within the last one month. The prices of sugar in wholesale and retail markets have increased by almost twenty one percent. Generally, whenever sugar prices increase, the first suspicion goes to the government’s encouragement to make ethanol from sugarcane juice. However, market experts and industry experts say that this time, it is not the ethanol policy but many other domestic and global reasons that are responsible for this sharp rise in prices.
Why did the balance of demand and supply of sugar suddenly deteriorate in the markets?
According to experts associated with the sugar industry, there are concerns regarding supply in the market at this time. Sugar prices are continuously showing strength in the major mandis of major producing states like Maharashtra, Uttar Pradesh and Karnataka. Overall production estimates have been impacted due to uncertainty of weather and uneven distribution of rainfall in some major sugarcane growing areas during the last season. The lack of coordination between mills’ management of monthly sugar quota coming into the market and availability in the open market has fueled prices. When there is a possibility of even a slight shortage on the supply side, wholesalers and stockists start purchasing in advance, which leads to a sharp increase in prices.
These ground factors, not ethanol policy, became the main reason for inflation.
It is often believed that sugar mills divert sugarcane molasses or direct sugarcane juice into ethanol production to earn more profits, which leads to shortage of edible sugar. The central government has already set strict guidelines and limits to maintain this balance. This time the main reasons for the rise in prices are rising input costs, increasing transportation expenses at mills and increase in the trend of sugar in the international markets. Globally, international prices remain strong due to production concerns in major exporters like Brazil and Thailand. This is having a direct psychological impact on the pricing strategy of domestic traders and mill owners.
Direct impact on local markets and retail shops
From the major markets of North India to the retail markets of South and West India, the price of sugar has started reaching beyond Rs 50 per kilogram. Due to increase in per quintal prices in the wholesale market, grocery shopkeepers at the local level have also increased the prices while protecting their margins. The costs of packaged food industry, bakeries, confectionary manufacturers and soft drink companies have started increasing. Its direct impact will be that in the coming days, there may be an increase in the prices of biscuits, sweets, cold drinks and other processed food items. In rural and semi-urban areas where per capita consumption is high, the impact of this increase is being felt immediately on the family budget.
Upcoming festive season and increasing concerns of consumers
During festivals and wedding events in the Indian markets, the demand for sugar increases by thirty to forty percent as compared to normal days. If prices are not controlled in time, consumers may have to pay higher prices in the coming months when demand peaks. Sweet traders say that due to increase in costs it will not be possible for them to sell products at the old rates. Efforts are being made by the government to control the situation by issuing open market sale scheme or additional release quota, but unless smooth supply of stock is ensured at the ground level, it seems challenging to stabilize the prices.