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News
Sugar output up 8%, hike in MSP to aid clear arrears: ISMA
Date:
21 Feb 2019
Source:
The Financial Express
Reporter:
FE Bureau
News ID:
36003
Pdf:
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Sugar production as on February 15 in the current sugar season has increased nearly 8% to 21.93 million tonne, against 20.35 million tonne in the same period last year. Totally, 494 mills across the country have produced the same.
The higher output this year is mainly because Maharashtra and Karnataka mills started their crushing earlier this year. Overall, the country is expected to produce less sugar this season as compared to last season, said Indian Sugar Mills Association (Isma) in its release on Wednesday.
Isma had earlier said considering the trend of yields, recoveries and drawal of sugarcane as well as diversion of some ‘B’ heavy molasses to ethanol, sugar output in the current season is estimated to be 30.7 million tonne, down 5-6% as compared to 32.5 million tonne in the previous season.
According to the apex body, the recent 7% increase in the minimum selling price (MSP) of sugar, from `29 per kilo to `31 per kilo, will generate additional revenue for mills and help these in the payment of cane arrears. Cane arrears have touched over `20,000 crore this year and the government raised the MSP of sugar to improve the liquidity of cash-starved mills and clear the mounting dues.
Crisil in its latest analysis said the operating margins of sugar millers could improve by 300-400 basis points (bps) in sugar season (SS) 2019 (October 1, 2018 to September 30, 2019), following a 7% increase in MSP to `31 per kg from `29 announced by the government last Thursday.
The rating agency further said this would lead to incremental domestic sales realisation of `3,300 crore, while higher export prices will generate another `200 crore. That will help mills cut their cane arrears, which stands at `20,000 crore now, by 18% to `16,500 crore. It will also cut the losses that millers have racked up because of excess supply and tepid exports.
According to it, raw material cost as a proportion of sugar sales increased to about 90% in the current season, following an uptick in the fair and remunerative price (FRP) of sugarcane, and subdued sugar prices owing to oversupply both locally and globally. Though the government took steps to arrest the losses of millers, non-integrated units continued to bleed in this season.
As per Isma estimtes, in Maharashtra sugar production till February 15, 2019, had gone up sharply to 82.98 lakh tonne as compared with 74.74 lakh tonne produced last year same period. In the current 2018-19 SS, six mills have closed their crushing operations in the state while 187 mills were operating whereas last year, 183 mills were operating on the corresponding date. Due to the early start of mills in Maharashtra, mills therein were expected to close earlier than last year, especially when the output from Maharashtra will be less than last year.
In Uttar Pradesh, 117 sugar mills were in operation and had produced 63.93 lakh tonne, against 64.54 lakh tonne by 119 mills on the corresponding date last year. The recovery of sugar achieved this season is 0.77% more than what was achieved so far during the last season.
However, the yield per hectare is lower than last year because of which the total production in UP will be less than last year.
In Karnataka, production shot up sharply to 38.74 lakh tonne, against 30.73 lakh tonne in the same period last year. Ten mills have closed their operations in the state while 57 mills were in operation as against 52 mills last season. In Tamil Nadu, 33 sugar mills were in operation and had produced 3.50 lakh tonne, against 2.90 lakh tonne by 28 sugar mills in 2017-18 SS on the corresponding date.
Gujarat has produced 7.78 lakh tonne with 16 mills in operation. Last year, 17 mills were in operation and had produced 7.25 lakh tonne. In Andhra Pradesh and Telangana, 24 mills had produced 4.50 lakh tonne as compared to 4.60 lakh tonne produced by 23 mills on the corresponding date last season. In Bihar, Uttarakhand, Punjab, Haryana, Madhya Pradesh and Chhattisgarh, production was 4.90 lakh tonne,2.15 lakh tonne, 3.75 lakh tonne, 3.60 lakh tonne and 3.20 lakh tonne, respectively, said Isma.
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