Sugar stocks are buzzing on news that the government will scrap the stockholding limit on sugar traders.
The stockholding limit currently on the traders is about 500 tonnes of sugar that he can keep on a maximum limit. The limit reduces the buying interest of the traders.
This limit was introduced in April 2016 when the country was moving into a low production year in 2016-17.
Now with production getting back to normal in 2017-18 and with prices in the last 30-45 days having come down by Rs 3-3.5/kg, there is no need for stock holding limit says, Abinash Verma, Director General, ISMA.
According to him, removal of this limit will increase the buying by the traders because between the mill gate and the retail level, the pipeline generally has about 10-15 lakh tonnes of sugar to ensure smooth supply.
All this will help to increase demand giving a boost to prices, said Verma.
Removal of stock holding limit will definitely be extra buying, which will improve market sentiments, said Verma.
As far as sugar production is concerned for the current year, ISMA has estimated 251 lakh tonnes against the consumption requirement of a similar number, said Verma.
According to Gaurav Goel of Dhampur Sugar, with the stockholding limit going out believe that large corporates and traders will now be able to buy more. The pipeline of sugar in the last three months was quite dry, he added.
The news will stall the decline in prices and help increase them, he said. Therefore, sugar prices are expected to stabilise going ahead and sales too will also improve in Q4FY18 compared to that of Q4FY17.
Usually, sugar demand is historically low in winter season, said Goel.
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