Friends,
Sugar mills is UP have still not commenced crushing and are fighting the govt against raising of cane price to 140/- per qtl. An un-named executive of ‘Bajajhind’ says that it will add Rs 350 to 390 crs to the costs this year but he also confirms that the profitability can still be there due to higher sugar prices this year. Sugar production is estimated to be 22 M/Ts against 26.5 M/Ts last year.
At 9 pc recovery the sugar will cost mills at around Rs 1600/qtl (Rs 300 to 325 per qtl cost is recovered by sale of press-mud,molasses and co-generation power. All leading mills have distilleries and co-generation facilities. Maharashtra does not face cane pricing problems because there sugar co-operatives and farmers are owning the mills as members of Co-operative societies.
Softening of interest rates will be of benefit to sugar industry as it has to carry stock till sold through the monthly releases by govt. The levy portion is just 10 pc now and the mills make huge profits in years of high sugar prices. This happens to be such year only. The world sugar prices are sideways but costly dollar is good defence. Last year India exported 4.5 M/T sugar.
If the inflation would not have come down, the govt would have been very concerned about the rising sugar prices but this situation is narrowly saved for industry. Sugar industry profitability is complex due to volatility of sugar prices and interest rates and production variation adds further dimension to it. Mills do not have capacity to vary production because the cane in their procurement area has to be crushed by them. Every aspect of it can be made manageable but the politicians do not allow it and keep powers with them while a sugar board representing all sides who have interest may easily do the job and in a more amicable manner.
Sugar is a capital intensive industry. It has to be operating at the most optimum level of operation. Courts are already having to intervene in sugar related cases.
HariOm,
Krsna Khandelwal
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