Rain spell may keep sugar prices high till mid-Dec

The expectation was that cane crushing would start by mid-October and new sugar would come into the market by early November, easing prices.

Oct 06, 2009 08:10 IST India Infoline News Service

The current spell of rain in Maharashtra will impact sugar availability, hence prices. Current estimates of sugar production remain unchanged, industry veterans claim.

“If this current spell of unseasonal rain carries on for another five-six days, it may improve sugarcane availability but negatively impact recovery from the cane. So, sugar production is expected to fluctuate within the projected band, of around 46-50 lakh tonnes. But sugar prices are likely to remain high till mid-December, when we had expected them to start easing by end of this month because mills will start crushing cane late,” said Indrajit Mohite, chairman, Yeshwantrao Mohite Krishna Sahakari Sakhar Karkhana, a sugar co-operative mill, near Satara.

The expectation was that cane crushing would start by mid-October and new sugar would come into the market by early November, easing prices. However, with mills now expected to start crushing only by early November, sugar prices are likely to remain high till mid-December. Mr Mohite added mills have nearly exhausted their stocks.

Ajit Chougule, secretary, Maharashtra Rajya Sahakari Sakhar Sangh (sugar federation), the apex body for the state's co-operative sugar mills, confirmed that preliminary estimates of cane production in Maharashtra remain unchanged.

“Current estimates are that the state will produce 400 lakh tonnes of cane and 46 lakh tonnes of sugar. These estimates still hold good despite the rain of the past couple of days. We will review these figures in the next 8-10 days,” Mr Chougule said. However, he ruled out any impact on sugar prices due either to the rains or a delayed start to the crushing season.

Clarifying on the start of the crushing season in the state, Mr Chougule referred to the meeting convened by state chief minister, Ashok Chavan, on August 3, when it was decided to start crushing on November 1. Multi-state co-operatives or those mills located on the state's borders with Karnataka and Gujarat will be allowed to start earlier if they fear that mills from across the border lure the cane from the state. Such mills will have to apply to the sugar commissioner for clearance.

Industry is not so confident about rates or availability. Mr Mohite complained that for the past few months, traders have not been lifting their free sale sugar on the grounds of poor demand.

“Consumers complain of high sugar prices, while traders tell us that demand for sugar is low. This leads to a lapsing of the free sale sugar to the levy quota and mills have been losing money. Our mill has lost Rs 15 crore in the past four-five months on this account. This is a lose-lose situation for the farmer, the mill and the consumer,” Mr Mohite said. Mills make a profit selling sugar at any price over Rs 24 per kg.

“There is either a nexus between the trader and the retailer or there is a government plan to increase sugar availability for the levy quota,” Mr Mohite alleged.

The state government has bought close to 30 lakh tonnes each for the two months of September and October to distribute through the BPL channels as well as to the above poverty line (APL) families. This has been bought at Rs 30 per kg from the mills, while the government will sell it at Rs 20 per kg, bearing the Rs 15 per kg difference (to the Rs 10 per kg are added Re 1 for excise and Rs 4 per kg for transport).

Source: The Economic Times

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