The 16 per cent increase in state advised prices (SAP) of sugar cane is set to raise the cost of sugar production for sugar mills in Uttar Pradesh by around 10 per cent this crushing season, credit rating agency Icra has said.
Consequently, a major portion of the higher prices would be nullified, resulting in a modest operating profit for most of the UP-based sugar mills in the coming quarters.
Based on the current prevailing prices and costs, operating margins for UP-based sugar mills will moderate from the levels seen in the second half of sugar year 2011-12 unless demand-supply dynamics permit sugar mills to pass on the cost increases, it added.
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