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By:

Rajendra Joshi

3 December 2024 at 9:20:26 am

Sugar industry strains as traders reap profits

Gap between ex-mill prices, retail rates raised questions Kolhapur: The Indian sugar industry is caught in a deepening crisis, with sugar mills struggling to secure remunerative prices for their produce even as traders and middlemen appear to be making substantial profits. While sugar mills are receiving between Rs 4,600 and Rs 4,800 per quintal through recent sale tenders, retail prices have remained as high as Rs 58 per kg. The widening gap between ex-mill prices and retail rates has...

Sugar industry strains as traders reap profits

Gap between ex-mill prices, retail rates raised questions Kolhapur: The Indian sugar industry is caught in a deepening crisis, with sugar mills struggling to secure remunerative prices for their produce even as traders and middlemen appear to be making substantial profits. While sugar mills are receiving between Rs 4,600 and Rs 4,800 per quintal through recent sale tenders, retail prices have remained as high as Rs 58 per kg. The widening gap between ex-mill prices and retail rates has raised serious questions about the role of intermediaries and the effectiveness of the Centre’s efforts to contain sugar prices. The margins available to traders and intermediaries have reportedly crossed 20 per cent, leaving sugar millers perplexed. At a time when both sugarcane growers and mill operators are under financial pressure, the trading chain appears to be benefiting disproportionately. The Centre must examine this growing disparity and take corrective measures to prevent speculative profiteering. Retail sugar prices began rising sharply in August, touching nearly Rs 70 per kg in some markets. The escalation added to inflationary pressures and caused concern among consumers, particularly ahead of the festive season. In response, the Centre introduced a series of measures to improve domestic availability and moderate prices. These included permitting duty-free sugar imports, initially until October 31, a deadline subsequently extended to December 31. The government also directed sugar mills to commence the crushing season from October 15 and tightened monitoring of sugar stocks. In another significant intervention, it modified the ethanol policy, restricting the diversion of sugarcane juice, sugar syrup and B-heavy molasses for ethanol production. Following these measures, sugar mills began witnessing a decline in the prices offered through their sale tenders. Recent transactions have fetched between Rs 4,600 and Rs 4,800 per quintal. Going by the conventional relationship between ex-mill prices and retail rates, sugar should ideally have been available to consumers at less than ₹50 per kg. However, retail prices continue to hover around Rs 58 per kg, pointing to a substantial disconnect between the mill gate and the consumer market. Traditionally, sugar retailing operated on relatively thin margins. Since sugar is an essential commodity, retailers often treated it as a low-margin product to attract customers who would subsequently purchase other household provisions. The margin was sometimes informally equated with the resale value of the empty 50-kg jute bags in which sugar was supplied. This was considered a nominal return for retailers. That traditional pricing mechanism, however, appears to have undergone a significant change. The widening gap between mill-level tender prices and retail rates has created considerable scope for intermediaries to extract higher margins. The critical question is whether the additional amount paid by consumers is reaching the sugar mills or remaining within the trading chain. The issue assumes particular significance in Maharashtra, where the sugarcane pricing dispute has intensified ahead of the new crushing season. Farmers’ organisations have been demanding a minimum price of Rs 5,500 per tonne for sugarcane. Millers, meanwhile, are preparing to agitate for a revision in the Fair and Remunerative Price (FRP) framework and the restoration of a more supportive ethanol policy. The Swabhimani Shetkari Sanghatana, led by Raju Shetti, has taken a firm position that sugar mills should not be allowed to commence operations until farmers receive an acceptable price for their cane. Shetti has also drawn the state government’s attention to the unusually high retail prices of sugar, questioning why consumers continue to pay more even as mills are forced to sell at relatively lower rates. The Centre’s sudden changes to the ethanol policy have further complicated the industry’s financial position. Ethanol production had emerged as an important revenue stream for sugar mills, enabling them to diversify operations, improve cash flows and enhance their capacity to pay farmers. Restrictions on the diversion of sugarcane-based raw materials have weakened this support at a critical juncture. The resulting contradiction is difficult to ignore: farmers are demanding better cane prices, millers are struggling with shrinking realisations and policy uncertainty, while intermediaries appear to be benefiting from the gap between wholesale and retail prices. The government cannot address the sugar crisis merely by regulating mill stocks, imports and ethanol diversion. It must also examine the entire supply chain, identify where the widening margins are accruing and ensure that the benefits of market interventions reach both sugarcane growers and consumers. With nearly Rs 2 lakh crore riding on the sugar economy, allowing intermediaries to thrive while the industry’s primary stakeholders struggle would be a serious policy failure.

Budget 2026: Cautious Today, Focused on Tomorrow

Writer: Sayli Gadakh
Sayli Gadakh
Feb 3
3 min read

The budget places greater emphasis on long-term growth, structural reforms, and financial discipline rather than short-term relief.

The Union Budget 2026 has been presented at a time when the economy is showing steady growth yet continues to face persistent challenges such as inflationary pressures, unemployment concerns, and uncertainty in the global economic environment. Against this backdrop, the budget places greater emphasis on long-term growth, structural reforms, and financial discipline, rather than prioritising immediate or short-term relief measures.


Overall Fiscal Approach

The budget continues the government’s focus on containing the fiscal deficit while simultaneously increasing spending in productive and growth-orientated areas. Higher allocations have been made for capital expenditure, including investments in roads, railways, ports, and urban infrastructure. Such spending not only generates employment in the short term but also improves efficiency, boosts connectivity, and supports sustainable economic growth over the longer period.


At the same time, the government has consciously avoided large-scale giveaways or populist measures. This approach signals a clear intent to preserve financial stability, maintain investor confidence, and manage public debt in a cautious and responsible manner.


Impact on Taxpayers

For individual taxpayers, the budget offers stability rather than any significant relief. Income tax slabs have largely remained unchanged, which may come as a disappointment to the middle class that was hoping for meaningful tax cuts. In the context of rising living costs and inflation, the real benefit of existing tax provisions appears limited. As a result, tax planning will continue to operate within the current framework, relying on available deductions, exemptions, and investment-linked incentives.


For companies, the budget provides a sense of certainty and continuity. Corporate tax rates have been left unchanged, enabling businesses to plan future investments and expansion with greater clarity. Changes related to the taxation of share buybacks are aimed at reducing tax advantages available through specific routes and ensuring a more level playing field between dividends and buybacks. While these changes may increase the tax burden for some companies, they also simplify the tax structure and enhance transparency and fairness in the system.


GST and Compliance

On the GST front, the budget has not announced any major changes to tax rates, providing continuity and predictability for businesses. However, the government has clearly signalled a move towards stricter monitoring and enforcement through increased use of technology, data analytics, and invoice matching. As a result, businesses—particularly small and medium enterprises—will need to be more vigilant with return filings, reconciliations, and maintenance of proper documentation.


While compliance requirements may become more demanding, stronger enforcement measures can help curb tax evasion and promote a more level playing field. Over time, this is expected to improve overall tax discipline and foster fairer competition across markets.


Sectoral Focus

Infrastructure remains the biggest beneficiary of Budget 2026, with sustained investment in transport, logistics, and urban development continuing to be a key policy priority. Such spending is expected to stimulate economic activity across a wide range of sectors by improving connectivity, reducing costs, and enhancing overall productivity. Technology-focused areas, including digital infrastructure, cloud services, and artificial intelligence, have also received increased attention, reflecting the government’s emphasis on building a future-ready and innovation-driven economy.


At the same time, allocations for certain welfare schemes have seen only marginal increases. This has raised concerns about whether consumption demand, particularly from rural and lower-income groups, will see a meaningful boost in the short term.


Conclusion

Union Budget 2026 is cautious and forward-looking in its overall approach. It prioritises the creation of a strong and resilient economic base rather than offering immediate tax relief or short-term incentives. While certain sections of the population may feel some pressure due to limited short-term benefits, the budget seeks to lay the foundation for stable and sustainable growth over the long run. Its real success will ultimately depend on how effectively the announced measures are implemented, particularly through the efficient and timely use of the capital and revenue expenditure outlaid.


Disclaimer: This article represents a general opinion based on budget provisions and economic observations. It is not intended to support or oppose any political party or ideology.


(The writer is a Chartered Accountant based in Thane. Views personal.)

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