MUMBAI: India's sugar consumption during the peak demand season is set to fall for a second straight year after various states imposed restrictions including restaurant and shop closures to halt rising cases of COVID-19, industry officials told Reuters. Lower demand could increase inventories in India, the world's biggest consumer of the sweetener, and may put downward pressure on local prices. Lower domestic sales could force mills to export more sugar in the next marketing year, putting pressure on global prices as well.
"The second wave of coronavirus has been disrupting the market during the peak demand season. Purchases by bulk buyers have been falling," Praful Vithalani, president of All India Sugar Trade Association (AISTA), told Reuters. Consumption of cold drinks and ice cream, and as a result demand for sugar, rises 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 and other functions to try and curb the coronavirus.
Maharashtra, Rajasthan, Chhattisgarh, New Delhi and Uttar Pradesh are among states that have imposed various curbs this month as daily COVID-19 cases nationwide hit a new record and the health system crumbled under the weight of new infections. Sugar consumption was expected to rebound sharply in the 2020/21 marketing year ending on Sept. 30 but the new restrictions imposed by states mean consumption will probably be steady at around last year's level, Vithalani said.
Sugar demand, which usually rises by more than 1% each year, fell 0.8% in 2019/20 to 25.3 million tonnes because of one of the world's strictest lockdowns imposed last year in March. Demand from bulk consumers had recovered to normal levels by the end of 2020 but started falling again this month due to uncertainty over coronavirus-led lockdowns, said Ashok Jain, president of the Bombay Sugar Merchants Association.
A few mills in Maharashtra, a key producer, are selling sugar below the government's fixed minimum selling price of 31,000 rupees ($414.04) per tonne as they are producing much more than demand, Jain said.