Majority of sugar mills’ in Uttar Pradesh (UP) estimate that their realisation from core activities (sugar sales) may rise atleast 10 per cent by the end of the current season due to shortage of cane for crushing. Average sugar mills forecast ex-factory selling price (realisation) to surge to Rs 45 a kg in a month, when most of the mills would announce closure for this season.
However, Bajaj Hindusthan (BHL), the market leader, anticipates its realisation to rise to Rs 50 a kg.
According to the latest company analysis by Kunal Vora of BNP Paribas, Kushagra Bajaj, Joint Managing Director of BHL, last week had estimated sugar realisation of the company to go up to Rs 50 a kg by the end of the current crushing season (that is March 2010).
This means, consumer prices of the sweetener are likely to surge to Rs 55 a kg from the current price of Rs 38 a kg.
Meanwhile, a senior official from Maharashtra Sugar Commissioner’s office, estimated mills’ realisation from sugar business in the state to be between Rs 38 and Rs 40 a kg.
Realisation is the ex-factory price of sugar at which mills sell to stockiest according to the government’s release order. However, mills continue to sell 10 per cent of the sugar output at Rs 13.50 a kg to the government which the latter sells to consumers through public distribution system at Rs 20 a kg.
“For the moment it (realisation) may hit the barrier of Rs 45 a kg. But, sustaining this level would be difficult,” said an official with a sugar mill on condition of anonymity.
More From This Section
Sugar price rise forecast faces many hurdles as the government keeps changing policies seeking permission for additional duty-free imports and extra release. The government’s extra pressure on mills will not allow prices to rise further in the spot market and therefore, realisation may move in a close range of the current level, the official added.
A fortnight ago, realisation from sugar business had touched Rs 44 in some parts of north India but later slipped to stay at Rs 40 a kg currently.
“Indian sugar prices are closely linked with global phenomena. And global development especially in Brazil, the world’s largest sugar producer, does not indicate any dramatic price escalation,” said Sanjay Tapriya, chief financial officer of Simbhaoli Sugars.
Traditionally, only need based buying takes place during the lean period like today as crushing for the new season is estimated to start by March in Brazil. Mass consumers, preferably, postpone their demand when far-month price in the futures market is quoted lower than the current month price, he added. White sugar for March delivery climbed $4.10, or 0.6 per cent, on Monday to $727.70 a tonne on the Liffe exchange in London. In Mumbai also, prices of the sweetener declined to Rs 38-40 a kg from Rs 42-43 a kg a week ago.
According to Vora, sugar realisation this year is likely to average at Rs 34 a kg as against Rs 22 a kg last year.
Meanwhile, barring few sugar mills in western Uttar Pradesh, all others are operating between 45-50 per cent of their capacity due to unavailability of sugarcane. In western UP, however, mills are operating between 60-65 per cent of their installed capacity. This poses a threat with mills closing well ahead of the scheduled time of March-end or early-April.
Now, experts estimate the country’s total sugar output to remain below 15 million tonnes this year as against 14.7 million tonnes last year.