Pune: An increase in sugarNSE 1.62 % prices by 7 per cent, and improved export realisations driven by a modest rise in international prices, will aid Indian sugar millsNSE 1.13 % to improve their operating margins as the mills will get an additional cash flow of Rs 3,300 crore, rating agency Crisil Ratings said. Mills will also be able to reduce arrears by 18 per cent.
Gautam Shahi, director at Crisil said, “Higher minimum support price (MSP) would mean non-integrated millers could break even or report low singledigit operating margins of 2-5 per cent this season compared with 1-2 per cent in SS (sugar season) 2018, while integrated players could see that number up 13-15 per cent compared with 9-12 per cent. Integrated sugar millers will also continue to benefit by fast-tracking ethanol manufacturing.” With world production expected to decline by around 5 per cent and the output of Brazil, the largest sugar producer, declining by 12 per cent, international sugar prices are expected to strengthen by 3 per cent to $360 a tonne.
Even standalone mills are expected to break even in SS 2019, given the pick-up in sugar prices. This would enable the mills to just about cover their cost of production, which is estimated to be Rs 33 per kg in UP, and Rs 31-32 in Maharashtra and Karnataka.