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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.

SIFs: A Modern Investment Product

Writer: Kaustubh Kale
Kaustubh Kale
Nov 8, 2025
2 min read

A modern long-short investment product is here - one that blends the trust and discipline of mutual funds with the sophisticated flexibility of hedge-fund-style strategies. SEBI’s newly approved Specialised Investment Funds (SIFs) mark the next evolution in wealth-building vehicles for high-net-worth investors.


For decades, Indian investors had to choose between two ends of the spectrum - mutual funds, which are long-only, and Portfolio Management Schemes (PMS) / Alternative Investment Funds (AIF) structures, which offer wider strategy flexibility but operate in a higher-ticket segment. SIFs now bridge this gap, offering the best of both worlds: institutional-grade long-short investing within a mutual-fund-like regulatory structure. They offer professional investors access to advanced investment strategies within a regulated, transparent structure.


What makes SIFs different?

Unlike traditional funds that profit only when markets rise, SIFs allow fund managers to take both long and short positions - with up to 25% of the portfolio allowed as pure short exposure. This provides the ability to potentially generate returns not only in strong markets, but also during downturns and sideways phases. Where long-only funds may struggle in non-directional markets, SIFs can tactically deploy options, futures, spreads, and sector rotations to seek alpha and manage downside risk.


This makes SIFs uniquely suited for three market regimes:• Strong or trending markets• Sideways or range-bound markets• Volatile periods


Who can launch and who can invest?

Only SEBI-regulated mutual fund houses can launch SIFs - ensuring governance, oversight, and track record. These funds are not for retail investors. They are meant for HNI and sophisticated investors, with a minimum ticket size of ₹10 lakh across SIF strategies (PAN-level).


Portfolio design and risk management

SIFs may invest across equity, debt, and hybrid strategies, including long-short models, hedged books, and tactical derivative positions. To enhance transparency, SIFs must disclose a ‘risk-band’ indicating potential volatility - helping investors understand the strategy’s risk level before committing capital.


What should investors expect?

Performance in SIFs will depend heavily on manager skill, risk discipline, and market structure. In sharp bull markets, they may lag pure equity funds due to hedges. However, in volatile or range-bound conditions, they can potentially deliver superior stability and improved risk-adjusted returns. Basically, their ability to protect downside and capture tactical spreads can provide meaningful stability and alpha.


Think of them as smart shock absorbers - built to accelerate during favourable phases while controlling the skid when markets turn unpredictable.


A new era for Indian portfolios

SIFs represent India’s move toward globally practiced, innovation-driven, risk-aware investing. For investors seeking smarter diversification, volatility management, and tactical alpha, SIFs may become a powerful addition to modern portfolios. The era of next-generation investing in India has officially begun - and SIFs could well become the flagship vehicle for sophisticated wealth creation in the years ahead.


(The author is a Chartered Accountant and CFA (USA). Financial Advisor.  Views personal. He could be reached on 9833133605.)

 

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