Margins of sugar mills likely to increase in FY18: ICRA

India Infoline News Service | Mumbai | July 27, 2017 17:00 IST

Sugar stocks are expected to be around 4.0-4.5 million MT at the end of the sugar season of 2018, as per the agency.

The sugar mills margins are expected to come under some pressure from the third quarter of FY18 onwards, as per the estimates of the credit rating agency ICRA.
 
Sugar stocks are expected to be around 4.0-4.5 million MT at the end of the sugar season of 2018, as per the agency.
 
Production of sugar is expected to be around 24.5 million MT in sugar year (SY) 2018, higher from 20.3 million MT in SY2017. Despite the rise in the sugar production, the sugar stocks will remain at the same level as the estimated consumption is stood around 24.5 million MT in the SY2018.
 
Along with this tight stock situation and an increase in the import duty on sugar to 50% from 40% is likely to support the sugar prices in the near term. But increase in cane prices may result in some moderation in margins from Q3 FY2018 onwards, despite firm sugar prices.
 
Fair and remunerative price (FRP) of the sugar fixed at Rs 255 per quintal for SY2018 season by the Cabinet Committee on Economic Affairs (CCEA), an increase of around 11% against last year.

This is likely to increase the production cost for sugar mills in FRP in the states like Maharashtra, Karnataka, Andhra Pradesh and Telangana etc.

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