Ex-Mill Sugar Prices Decline Following Government Interventions, Retail Rates Lag

Ex-mill sugar prices fell nearly 30 percent to ₹47 per kg on Monday, down from a peak of ₹67 per kg recorded on August 18. Industry sources indicated that the sharp correction follows a series of government interventions, though the downward revision has not yet filtered down to retail shelves.

While declines in ex-mill rates reflect almost immediately in wholesale markets, retail pricing typically lags. Retailers who previously acquired stock at higher rates are hesitant to sell at a loss. They continue to price existing inventory at older rates until current stocks are exhausted. A typical retailer holds 10 to 15 bags of sugar, each weighing 50 kg, meaning retail prices generally adjust only after fresh stock is procured at lower rates. Industry estimates suggest it takes at least ten days for these changes to reflect at the retail level.

Data from Sunday showed retail sugar selling at ₹64.23 per kg, compared to a wholesale rate of ₹59.72 per kg. Industry sources note that a typical price gap runs ₹2 to ₹3 per kg between ex-mill and wholesale prices, and ₹7 to ₹8 per kg between ex-mill and retail prices.

The price decline follows the government's decision to permit mills that refined sugar for export to redirect that supply into the domestic market. An estimated 3 lakh to 3.5 lakh tonnes of refined sugar are expected to enter the domestic market over the next two months. Additionally, the government banned sugar exports and opened up imports to manage pricing.

Alongside supply adjustments, the Centre introduced stricter stockholding norms. Effective September 1, bulk consumers utilizing more than 10 tonnes of sugar a month are prohibited from holding stock for more than 15 days at a stretch. Bulk consumers who previously held stock for longer periods have trimmed inventories to comply with these new rules, and the monthly quantity sold by each mill to bulk consumers is now subject to verification.

The Centre has previously attributed rising prices to mills jacking up rates, maintaining that the country holds ample sugar stocks despite lowered production estimates. Production projections for the 2025-26 marketing year, running from October to September, have been revised downward to 306 lakh tonnes from an earlier projection of 343 lakh tonnes. Annual domestic demand currently stands at approximately 280 to 285 lakh tonnes.

"The current lag between ex-mill sugar price corrections and retail shelf rates highlights a standard inventory clearing cycle in traditional retail supply chains. When regulatory interventions and supply shifts cause sudden wholesale price drops, small retailers holding older, higher-priced inventory naturally face a delay in passing on benefits to consumers to protect margins. For businesses operating across supply chains, managing inventory turnover efficiently during regulatory shifts is critical to mitigating cash flow friction and aligning with market corrections." — Dr. Shishir Gupta, Founder & CEO, StartupLanes