“Profitability is likely to remain up in the June quarter. We expect the average ex-factory sugar
price to remain elevated at Rs 33–33.5 a kg for that quarter, as against Rs 31–31.5 a kg for the March quarter. The increase in price would proportionately raise margins for mills,” said Abinash Verma, director-general, Indian Sugar Mills Association (Isma).
After a low of Rs 19 a kg in August last year, the ex-factory price was Rs 33-34 a kg by end-March; the average rise in the quarter was 15 per cent. They stabilised thereafter and rose only one per cent more until this month.
“The industry’s viability improved in the second half of FY16 with increase in sugar prices and lower cost of production, a result of higher sugar recovery. The governments at the Centre and states have evolved more rational policy frameworks in respect of cane pricing, ethanol and exports. It is desirable that the same approach continues for restoring the industry's health over the medium term,” said Ajay Shriram, chairman, DCM Shriram.
Mills are also benefiting from the policy on ethanol, for blending with petrol. The government HAD announced a higher ethanol price payable by oil marketing companies (OMCs) at Rs 48.5–49.5 a litre.
“Domestic ex-mill sugar prices hit a three-year high (crossed Rs 34/kg) during the fortnight ended March 31, due to a continuous fall in domestic sugar production and tightness in the global market (global agencies have raised deficit expectations to five to seven million tonnes, on dryness in the top three producer countries). Resultantly, global prices scaled to a one-year high during March (raw sugar at $0.16/lb),” said Achal Lohade, an analyst with JM Financial.
Global firm Kingsman has forecast India’s sugar production at 25.1 million tonnes, about 11 per cent lower than the 28.3 mt last year. An ICRA report estimates India’s closing stock at 7.6 mt this year, as against 9.5 mt last year.