Sugar stocks turn bitter
Sugar stocks seem to have developed a bitter taste today. Shree Renuka Sugar is currently the top loser on the BSE. The stock is down over 3.5% at Rs.13.45 and 52-week low stands at Rs.12. Balrampur Chini is also down in the red – down almost 3% at Rs.52 levels.
The sector is back in the limelight following the end of FY15 or 31st March to be more precise when the sugar mills have to pay the farmers their arrears. News is that payments owed to sugarcane farmers by mill owners touched a whopping #8377;19,243.63 crore as at 7th April for the 2014-15 season (October-September). Uttar Pradesh, the country’s second largest sugar producing State, accounts for more than half of the total dues, with mills owing almost Rs.9,716 crore to farmers. Maharashtra, the biggest sugar maker, has outstanding payments of Rs.2,864 crore, while arrears in Karnataka stand at Rs.2,402 crore.
At the epicenter of all this is the State Advised Price or SAP. This is the price which sugar mills have to pay the farmers and is set by the States. This price is over and above the fixed price by the Center. Currently, the SAP stands at Rs.280/quintal while fair price is at Rs.220/quintal.
This is the fifth straight year of surplus production through 2014-15 and this has a such pushed down sugar price and global prices too have crashed, making exports unviable. On the other hand, cane costs have been rising. Sugar prices are ruling below costs by up to 35% in these states, and even factoring in the realisations from other cane by-products, mills are incurring huge losses.
The Food Ministry is set to convene a meeting with Chief Ministers of States on April 16, to examine solutions to help growers as well as mill owners.
For the current season, sugar output is estimated at 265 lakh tonnes (lt), with domestic consumption pegged at 244 lt. The industry began the season with a carryover stock of 75 lt.