During the peak demand season, India’s sugar consumption is set to fall for a second year straight. This comes after various states imposed stringent restrictions on public mobility including restaurant and shop closures to halt rising cases of covid.
As a simple law of economics, over supply in comparison to low demand leads to an increase in inventories in the economy, thus, lower demand for sugar can increase inventories in India. It is to be noted that India is not only the second largest sugar producing country but also the world’s biggest consumer of the sweetener. Thus with low demand, downward pressure would be put on local prices. Indirectly, this will also put pressure on global prices as lower domestic sales could force mills to export more sugar in the next marketing year.
Praful Vithalani, president of All India Sugar Trade Association (AISTA), told Reuters that “The second wave of coronavirus has been disrupting the market during the peak demand season. Purchases by bulk buyers have been falling,”.
As it is known, consumption of cold drinks and ice cream is usually high in the summer season which ultimately leads to a rise in demand for sugar. Thus, the rise in demand is high in India during the summer months that run roughly from March to June. Demand also gets a boost in summer from the wedding season but some states have now restricted the number of guests at weddings in its pursuit to curb the spread of coronavirus which has indirectly affected the demand for sugar in India.
Maharashtra, Rajasthan, New Delhi, Chhattisgarh and Uttar Pradesh are some states that have imposed various curbs this month as daily COVID-19 cases nationwide hit a new record.
According to Mr. Praful Vithalani, sugar consumption was expected to rebound sharply in the marketing year 2020-21, ending on Sept. 30. But grimly, the expectations didn’t fructify as the new restrictions were imposed by states.
Sugar demand, which usually rises by more than 1% each year, fell by 0.8% in the financial year 2019-20 to 25.3 million tons. This was due to the fact that one of the world’s strictest lockdowns was imposed last year in March which had an immense crippling effect on the economy, so much so that India, last year, saw its worst recession in years.
As the first wave was successfully mitigated by the authorities, demand from bulk consumers had recovered to normal levels by the end of 2020. But given the current status of the health crisis of India, demand has started falling again this month due to uncertainty over coronavirus-led lockdowns. This point of view was confirmed by Mr. Ashok Jain, president of the Bombay Sugar Merchants Association.
Mr. Ashok Jain further stated that a few mills in Maharashtra, a key producer, are selling sugar below the government’s fixed minimum selling price of 31,000 rupees per ton as they are producing much more than demand.