Cane arrears down 60% on better prices

With better domestic sugar prices, cane arrears are likely to it come down even further going forward, says ISMA

Sugar mills’ cane payment arrears are down 60 per cent from this time last year, after a sharp rise in the price of sugar and financial help from the central government.

Data from the Indian Sugar Mills Association (Isma) showed cumulative cane arrears at Rs 13,300 crore as on April 12, compared to Rs 21,800 crore a year ago.

From Rs 19 a kg in August 2015, ex-factory realisation for mills is now Rs 32-33 a kg. “With improvement in price, it is expected that cane price payments to farmers will improve, for arrears to come down substantially further,” said Abinash Verma, director-general, Isma.

The current ex-factory realisation is near average cost of production. Any improvement in the price and they'd begin making profits.

“While the price movement in the domestic market got support from lower output estimates, a global deficit forecast also helped the price increase in the world market,” said an analyst with a global brokerage.

Isma estimated the country's production at 24.3 million tonnes as of last Friday, down nine per cent from 26.5 mt a year ago. Since the number of mills in operation at 117 this year is lower than the 245 as of April 15 last year, any significant increase in output looks unlikely. The food ministry’s forecast is for output at 25.5 mt. India reported 28.3 mt last year.

  The Uttar Pradesh government offered a production subsidy of Rs 40 per quintal of cane crushed to mills. And, the government allowed higher prices for ethanol. In global markets, the deficit this year is expected to be four mt; prices jumped six per cent in the past few weeks. All these positive developments have reflected on stock prices of factories.

Isma says mills have dispatched 13.2 mt for sale in the domestic market, 0.5 mt higher than the 12.7 mt despatched in the past season. Of the 3.2 mt of export allowed this year, mills have shipped 1.35 mt so far.