Mills for linking of cane and sugar prices

Indian sugar mill owners call for decontrol of sugar prices, seeking their fixation on the basis of processed sweetener

Indian sugar mill owners have called upon decontrol of sugar prices, seeking their fixation on the basis of processed sweetener.

"The cane prices would have to be linked to finished product prices," said Yatin Wadhwana, managing director of Sucden India Private Limited, on the sidelines of ongoing Kingsman Asia Pacific Sugar Conference.

He was referring to the imbalance in current cane and sugar prices after partial decontrol measures were introduced early last month.

The measures will impact the mills' earnings as cane prices have gone up and sugar prices decreased, he said, adding the mills have to pay the fixed prices for the cane.

"The industry is in trouble as it has to pay a fixed price of cane," Wadhwana said.

He said the cane price in UP was Rs 2800/tonne with sugar recovery of 9 per cent, and in Maharashtra it was between Rs 2,300-Rs 2,800/t with sugar recovery of 10-12 per cent.

Sugar prices in India has dropped by over 10 per cent to RS 31,000/t (USD 560/t) recently due to surplus in supplies.

But Indian mills were not able to export sugar as their domestic prices were still higher than in the international markets.

Indian mills' white sugar prices averaged $550-$560/t ex-mill while Brazil's offer was lower at $470/t free-on-board.

Comparatively, the mills' production costs were also high, ranging between Rs 3,000/t to Rs 5,000/t.

The mills were also expected to face sugar surplus in the domestic market in the coming months.

This year's production is estimated at 25 million tons, or over 8 per cent or 2 million tons above consumption demand, Wadhwana said.

Indian mills were expected to export 1 million tons between October-September 2012-13, while imports of raw sugar was expected at 1.5 million tons in the 8 months to May, 500,000 tons of which would be processed for local market and rest re-exported, according to Wadhwana.

The oversupply situation would likely further depress sugar prices in the Indian market, said traders at the conference.