Aug 25 2009 5:35PM
MUMBAI, Aug 25 (Reuters) - Indian spot sugar prices eased on Tuesday after the federal government put curbs by restricting bulk buyers to keep stocks enough to meet demand for just 15 days, traders said.
In Kolhapur, a key market in top producer Maharashtra, the price of the most traded S-variety sugar eased 0.7 percent to 2,850 rupees ($58.5) per 100 kg.
"Stocks limit will create problems for companies. They have to change their buying pattern," said Ashok Jain, president of the Bombay Sugar Merchants Association.
"Traders are also not buying enough quantity on concerns government may take more steps to depress prices."
The stock limit for bulk consumers would be in force for six months and would be applicable to consumers whose monthly sugar use is at least 1,000 kg, the government said in a statement on Monday.
The Indian Sugar Mills Association (ISMA) opposes the government's move to restrict the amount of stocks that a bulk buyer can keep, ISMA President Samir Somaiya told reporters after meeting Farm Minister Sharad Pawar on Tuesday.
The government has already put stock limits for wholesale traders and retailers.
The market was talking about changes in sugar release mechanism and levy sugar quota, but there wasn't any announcement from the government side, Jain said.
Currently, the government decides the quantity of sugar to be released by mills in the domestic market. Besides, mills are forced to sell 10 percent of their output at low, state-set prices, and farm minister said this may be raised.
The country's peak festival season runs from August to October, when demand for sugar goes up as people consume more sweets and confectioneries.
Trade forecasts a 45 percent drop in India's sugar output to 14.7 million tonnes in the crop year to September.
Indian sugar mills have contracted imports of 4 million tonnes of raw sugar in the current season.
($1= 48.7 rupee
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