Higher sugar quota sometimes pose difficulty for sugar mills, but this time the government has provided relief by allocating a lower sugar quota for domestic sale in August 2024. A lower sugar quota helps facilitate smooth sugar sales and enables mills to gather capital for timely cane payments.
In an announcement on July 26 2024, the food ministry allocated a monthly sugar quota of 22 lakh metric tonnes (LMT) for August 2024, which is 3.5 LMT less than the quantity allocated in August 2023 (25.5 LMT = 23.5 LMT + 2 LMT additional). Last year, for the month of August, the government initially allocated a sugar quota of 23.5 LMT and later, on August 22nd 2023 , allocated an additional 2 LMT (over and above the 23.5 LMT already allocated for August 2023).
Additionally, the validity of the sugar sales under the monthly quota for July 2024 has been extended to August 15, 2024. In July 2024, the allocated sugar quota for domestic sale was 24 LMT. Considering the flood situation, the government has extended the sugar sales quota for July, which is yet another sign of relief for sugar mills, as many of them could not sell sugar due to adverse weather conditions. The extended timeline will help millers complete the quota on time and assist in clearing cane dues.
With a quota of 22 LMT for August, there will clearly be no pressure on the domestic market, and good demand is expected due to festivals during the month.
The lower sugar quota will help boost the financial liquidity of mills, as sugar prices have already risen by Rs. 70 to 80 per quintal since the announcement, and they are likely to increase further since the government is also considering a sugar MSP hike.
The government aims to control violations of stockholding limits; therefore, the industry should also assist them to achieve it by highlighting the challenges they are facing. With a view to stabilizing the prevailing sugar prices in the domestic market, improving the financial health of sugar mills, and enabling them to pay cane price arrears to sugarcane growers, the government has taken various measures, including the imposition of stockholding limits on sugar mills on a monthly basis, under the provisions of the Sugar (Control) Order, 1966, and the Essential Commodities Act, 1955.
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