A steady increase in realisation ahead of the festive season turned around sugar mills’ fortunes, with production of the sweetener becoming marginally profitable after four quarters of sustained losses.
Sugar mills in Maharashtra, India’s largest producing state, are making a profit of Rs 400-500 a quintal at the current ex-factory price of Rs 3,350-3,400 a quintal. Average cane prices paid by crushing units in Maharashtra works out to Rs 240-245 a quintal, resulting in a cost of production of Rs 2,800-2,900 a quintal. Since, sugar recovery is much higher at an average 11.5 per cent in Maharashtra, mills have suddenly turned viable in the past few months of the current sugar year (October 2011-September 2012).
The case is similar with the mills in Uttar Pradesh, the second-largest sugar producer in the country. In Uttar Pradesh, average cane payout is Rs 240-245 a quintal, thereby translating into an average cost of production of Rs 3,300–3,400 a quintal. With the prevailing ex-factory price in the state at around Rs 3,500 a quintal, sugar mills are making a profit of Rs 100-200 a quintal.
| SWEET RETURNS | |||
| Company | BSE price in Rs | % Chg | |
| Sep 17, ‘12 | Sep 18, ‘12 | ||
| Triveni Engineering | 18.89 | 20.05 | 6.14 |
| Shree Renuka Sugars | 33.35 | 35.35 | 6.00 |
| Sakthi Sugars | 28.35 | 29.95 | 5.64 |
| Uttam Sugar | 24.80 | 26.10 | 5.24 |
| Dhampur Sugar | 67.70 | 71.05 | 4.95 |
| Parrys Sugar | 60.30 | 63.20 | 4.81 |
| Bajaj Hindustan | 30.05 | 31.45 | 4.66 |
| Dharani Sugars | 35.79 | 37.00 | 3.38 |
| Ugar Sugar | 14.18 | 14.63 | 3.17 |
| Balrampur Chini | 67.09 | 68.59 | 2.24 |
| Bannari Amman Sugars | 900.15 | 909.95 | 1.09 |
| Data compiled by BS Research Bureau | |||
The two states contribute 62 per cent of India’s total sugar production, at around 16 million tonnes (mt) in 2011-12.
“The profit, however, is unlikely to compensate even a small portion of the loss incurred by them in the preceding four quarters when the ex-factory sugar price was ruling around Rs 500 quintal lower than the cost of production in both states,” said Abinash Verma, secretary general of the Indian Sugar Mills Association (Isma).
More From This Section
The government of Uttar Pradesh raised the State Advised Price to Rs 240-250 a quintal, leading the cost of production to be Rs 3,300 a quintal. Most of the time until June, the ex-factory sugar price was quoted lower than the cost of production. Last November, sugar was quoted at Rs 2,900-3,000 a quintal, which later plunged to Rs 2,850 a quintal and continued for a while.
Of the total estimated sugar production at 26 mt during the current sugar year, mills have sold 19 mt in the open market. Exporters have shipped another 3.5 mt. A quantity of around 2.5 mt was supplied to the government under the mandatory levy sugar scheme for sale through Public Distribution System at 10 per cent of the total annual production. Of the 19 mt of an estimated annual open market sale, around five mt was sold in the last quarter at a marginal profit.
The reversal in trend would set the tone for the new crushing season set to begin this November, a senior industry official said.
Reflecting the positive undertone, the share prices of major sugar companies shot up to six per cent on Tuesday. While Oudh Sugar Mills’ stock price jumped 6.2 per cent to Rs 28.25, Shree Renuka Sugars jumped six per cent to Rs 32.35. Similarly, Bajaj Hindustan and Simbhaoli Sugar stock on the Bombay Stock Exchange surged 4.7 per cent and 4.1 per cent to close at Rs 31.45 and Rs 27.85, respectively.
Meanwhile, Isma in a joint initiative with the National Federation of Co-operative Sugar Factories estimated cane acreage at 5.35 million hectares (ha) for 2012-13, a mere two per cent increase over last year. The estimates, however, have raised hopes for the possibility of upward revision in sugar output, which Isma had put at 25 mt for the ensuing crushing season.
The Union ministry of agriculture, however, has estimated 5.29 million ha in their first advance estimation on sugarcane sowing for the season 2012-13, about 1.3 per cent lower as compared to satellite a survey report for the same period last year. The estimates obtained based on satellite images proved true last year when Isma in the beginning forecast 26 mt of sugar output. Actual output of the sweetener was reported marginally higher at 26.2 mt.