Rising prices, high production deficit led to better profits.
Sugar companies’ realisation jumped to a historical high of up to 80 per cent this year on rising sweetener prices due to high production deficit. The current ex-factory prices are fetching between Rs 6 and Rs 10 a kg to sugar mills which producers claim to have never got in the past.
Prices are also getting support from global markets. On Thursday, white sugar futures hit the highest level since February 1981, supported both by bullish fundamentals and widespread gains in commodity markets due to a declining dollar. The commodity for delivery in March perked up to $694 a tonne in London. The sweetener prices have more than doubled this year.
Leading company executives are of the view that India’s sugar output is estimated at around 16 million tonnes, about 7.5 million tonnes lower than the consumption and moderately higher than last year’s production of 14.7 million tonnes.
India has already imported about 5 million tonnes of raw sugar mainly from Brazil and Taiwan to bridge the deficit, which is leading to a rise in global prices.
Meanwhile, Prakash Naiknavare, managing director of Maharashtra State Federation of Co-operative Sugar Factories (Sugar Federation) has already issued an alert by saying that sugar prices would start declining only by January 2011 when the cane output forecast would be released by the Central government.
“We are very positive that the country’s cane output will rise next year with a sugar production estimate of around 21.5 million tonnes in 2010-11 season,” said Naiknavare.
As first advance estimate sugar mills in Maharashtra have paid Rs 45 a quintal higher than the Fair and Remunerative Price (FRP) of Rs 157.5 a quintal announced by the Central government. Mills in the state will end up paying Rs 250 a quintal by the end of current season, about Rs 100 a quintal higher than last year. However, mills in Uttar Pradesh have been paying between Rs 210-215 a quintal for cane, a rise from Rs 140 a quintal last year. In Tamil Nadu cane price payable to farmers works out to Rs 165-170 a quintal.
Meanwhile, officials demanded that the government should de-regulate the sugar sector to let the market move like other agri commodities. In the current amendment of Sugar Control Order, the government doubled levy sugar quota from 10 per cent of total output to 20 per cent which, however, is pulling the average realisation down by 13 per cent, an official said.
Talking about levy, the official said that the government releases the quota through public distribution system after several months of stocking. By then an artificial deficit is created which raises prices of sugar in physical market. Therefore, the deregulation of sugar sector will check such artificial manipulation of price, he added.
Meanwhile, Sugar Federation is planning to propose to the Uttar Pradesh government to allow 2 million tonnes of raw sugar stuck at JNPT and Kandla for refining in Maharasthra, for which the latter is ready to pay the former 75 per cent of the total revenue.
The raw sugar lying idle at these ports is imported from Brazil and Taiwan for Uttar Pradesh. But, the government of UP is not allowing the stock to get unloaded which, experts believe, is also one of the reasons for sugar prices currently ruling over Rs 40 a kg in retail market throughout the country.
