'Sugar sector builds up inventory to avoid losses on sale'

Inventories are piling up for the country's sugar industry as it tries to save itself from selling the commodity at a loss, while pinning hopes on the government to soon provide incentives, a company official has said.
"With current cane price, the mills will suffer loss of Rs 600 for each quintal of sugar they sell in the market. The industry is trying to stock sugar to its maximum godown capacities to save itself from losses and hopes the government's action will help better recovery," Riga Sugar Co Ltd chairman and managing director O P Dhanuka told reporters here today.

The industry's holding capacity, however, is exhausted and now it will faces the prospect of distress sale.
He said with elections round the corner, delay in providing incentives will translate into late payments to farmers for their cane supply.
The industry is pinning hopes that incentives would be cleared by the government very soon as that would have a positive effect on farmers of some states of the country.
The India sugar industry is sitting on a sugar inventory of 118 lakh tonnes on January 31, which is equivalent to six month's consumption.

The industry has demanded Rs 3,000 per tonne incentive for sugar export, creation of buffer stock of sugar by the government and increasing import duty to 40 per cent from 15 per cent now.

If the industry does not get any major incentive and with bumper production estimated for the current crop year, it would lead to a loss of Rs 15,000 crore for the sugar industry, Dhanuka said.
"The average cost of production for the country has shot up to Rs 3,400 per quintal (100 kg) whereas ex-factory sugar price is at just Rs 2,800-2,900 per quintal," he said.
The country's annual sugar consumption is 250 lakh tonnes.