Maharashtra sugar mills start panic selling, traders keep away

Production cost is Rs 90 more than the existing ex-mill price.

Maharashtra mills have started panic selling with sugar prices falling significantly, but traders have decided not to purchase sugar until previous contracts are cleared.

Wholesalers cannot purchase and store more than 2,000 quintal of sugar, so traders from sugarcane-rich Pune, Ahmadnagar, Srirampur-Kopargaon have decided not to participate in the sugar tendering process. Traders from other sugarcane growing regions are also expected to follow suit if the trend continues. Mills are selling at Rs 2,610 a quintal against the production cost of Rs 2,700.

State cooperation department officials and the Federation of Cooperative Sugar Factories (FCSF) in Maharashtra – a representative body of over 150 mills – have confirmed panic selling.

Prakash Naiknavar, managing director of FCSF told Business Standard: “The federation has already sent a letter to the food ministry requesting a month’s extension for the unsold non-levy sugar quota of January. We have also urged for a reasonable non-levy quota for February. We have also requested the state cooperation minister and sugar commissioner to make an appeal to the food ministry.”

He said FCSF has appealed to all member mills not to panic sell and incur heavy losses because the present ex-mill realisation is lower by almost Rs 90 compared to the production cost.

“If this panic continues and ex-mill realisation further deepens, the state sugar industry could face a major financial breakdown,” said Naiknavare.

Yogesh Pande, founder president of the Maharashtra Sugar Merchant & Brokers’ Association, said: “There are practically no buyers of sugar. Price should be in the range of Rs 2,800 per quintal which would be acceptable to both millers and consumers. However, at present sugar price is at Rs 2,610 per quintal. Futures trade was also extremely volatile because this was the last date of settlement for the January series.”

“Sugar had touched a low of Rs 2,495 a quintal at 1 pm on com exchanges while February futures were trading at Rs 2,675 a quintal — a difference of Rs 180 a quintal. Physical spot prices at Kolhapur were in the range of Rs 2,630 a quintal. This shows there is disparity in prices.”

Rupesh Thakkar, director of Bhagawati Sugar Sales, said: “It is impossible for traders to purchase sugar when prices are falling largely due to the Centre’s move to increase the non-levy sugar quota to 1.7 million tonnes for January against 1.1 million tonnes last year at the national level. In case of Maharashtra, sugar mills have received 670,000 tonnes of non-levy quota for January compared to 370,000 tonnes last year. In such a situation, mills should not invite tenders till the past contracts are cleared.”

However, Pande said there was good news for the industry: “Pakistan, China and other European countries will be net importers this year, while India will have surplus sugar estimated at 24.5 million tonnes. As of January 17, production across the country was 8.4 million tonnes. All eyes now are on mills completing the formalities on OGL exports of five lakh tonnes by January 31.”