A month after sugarcane crushing season started in Maharashtra, millers in some parts of the state are worried about the momentary slide in sugar prices, which they say might affect their ability to pay growers. Mills, especially those facing a liquidity crunch, have started selling sugar at prices lower than the market average, thus depressing the market for other players.
Since the start of the crushing season, November 1, ex-mill prices of sugar have dipped by Rs 120 per quintal. At present, the ex-mill price of sugar is between Rs 3,280 and 3,450 per tonne, with most mills preferring not to sell below Rs 3,400. Some millers, however, are reported to have indulged in price undercutting, which is looked at seriously by the industry. Some newer mills in Marathwada have started this practice as they require cash to pay farmers the first installment payment.
Mukesh Kuvadiya, secretary of the Bombay Sugar Merchants Trader Association said the phenomenon was restricted to a handful of mills. “Sugar prices have fallen by Rs 100 since start of the season and most millers are selling at around Rs 3,400. However, mills facing liquidity crunch are resorting to lower prices,” he said. B B Thombare, chairman of the Western India Sugar Mills Association (WISMA), the apex body of private millers, also admitted to this phenomenon. “In our region, we have requested millers not to sell at below Rs 3,400 but some of the millers are still doing so,” he said.
A cooperative miller from Kolhapur said new mills that have already pledged their sugar to traders at lower prices are the ones indulging in this practice. “These mills would normally have a short season and need to have ready cash to pay farmers. Growers normally do not trust such mills,” pointed out the miller. Most such mills are expected to end their season by mid-January, and sugar prices are expected to stabilise by then.