Sugar Stocks Rise Despite Government Cutting Inventory Limit For Bulk Consumers

Sugar stocks extended their gains in early trade on Thursday, 20 August, even as the government tightened inventory limits for bulk consumers to check rising domestic sugar prices ahead of the festive season.

While Avadh Sugar & Energy shares had gained more than 2% in intraday deals, Simbhaoli Sugars and Shree Renuka Sugars shares gained more than 3%. Bajaj Hindusthan Sugar, Dwarikesh Sugar Industries and Dhampur Sugar Mills shares also moved higher.

Under the revised rules, dealers consuming more than 10 metric tonnes of sugar a month are allowed to hold stocks for only 15 days, compared with the earlier limit of 30 days. The restriction will come into effect from 1 September and remain in place until 30 November.

Sugar Prices Hit Record Highs

The government's move comes after a sharp rise in domestic sugar prices over the past month as supplies tightened and demand increased ahead of the festive season.

The all-India average ex-mill sugar price has risen to around ₹5,400-5,500 per quintal, compared with about ₹3,900 a year earlier. Retail sugar prices also climbed to around ₹52.30 per kg on 18 August, up nearly 13% from ₹46.34 a year ago.

Prices in markets such as Kanpur and Kolkata have crossed ₹6,000 per quintal, according to reports, while prices in the Muzzafarpur and Kolhapur regions have remained above ₹5,000 per quintal.

Supply Concerns Keep Sugar Stocks In Focus

The tighter inventory rules come amid concerns over sugar availability for the 2026-27 season, which begins on 1 October.

Industry estimates put opening stocks at around 40-42 lakh tonnes, although some estimates are lower at 32-35 lakh tonnes. Domestic consumption is expected to be around 50 lakh tonnes.

Patchy rainfall and dry weather have also raised concerns about sugarcane production. This has added pressure on supplies.

The current tightness follows lower-than-expected production in the 2025-26 season, along with healthy domestic consumption and higher diversion of sugar towards ethanol.

Government May Take Further Steps

The government had already limited dealers to 30 days of inventory last month, but prices continued to rise as available supplies tightened.

The latest order effectively halves the permitted stockholding period for larger bulk consumers. The government is also considering other measures to improve domestic availability, including allowing duty-free imports of raw sugar.

India currently imposes a 100% import duty on sugar. Any relaxation could allow imports after several years and potentially increase supplies in the domestic market. For sugar producers, higher realisations have helped offset rising sugarcane costs and pressure on margins in other parts of the business. However, additional domestic supplies through imports or other policy measures could limit further price gains.

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