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The sugar industry says mills are selling at a 25-30 per cent loss to their cost of output in the leading producing states of Maharashtra and Uttar Pradesh.
Prices in these states have fallen to the season’s lowest of Rs 23 a kg and Rs 26.5 a kg (ex-factory). The current cost of sugar production is Rs 34 a kg in Maharashtra and Rs 34.5 a kg in UP.
The industry reiterates that losses have been a feature for several quarters, with a continuous rise in cane prices by both the Centre and states keeping production cost elevated. The ex-factory sugar realisation has slipped to a four-year low in the country. In the past month, the ex-factory price has fallen by Rs 1.25-1.5 a kg through the country. Since the start of the current crushing season in October, ex-mill prices have declined by Rs 5-6 a kg.
He said mills will officially stop crushing from the first week of March due to want of cane but some could do even before, due to financial stress.
“In the current scenario, it has become difficult for us to pay even the Centre-determined Fair and Remunerative Price (FRP) of Rs 220 a quintal, leave alone the UP-fixed State Advised Price of Rs 280 a qtl,” another senior official said.
The UP government had, of the SAP of Rs 280 a qtl, said mills must pay Rs 240 as a first installment. Another Rs 20 a qtl was given to them by way of tax relief. Cane production in UP is expected to be around seven million tonnes in 2014-15, almost the same as last year, while sugar output is estimated at 6.4 mt.
There are 17 cases of mills’ corporate debt restructuring, with the total debt in this regard at Rs 5,294 crore.
