Sugar industry in a sweet spot, says Ind-Ra
16/11/2017
Sugar industry in a sweet spot, says Ind-Ra
16/11/2017 14:43
India Ratings and Research (Ind-Ra) has said that it expects sugar prices to remain firm for the majority of SS 2017-18, despite higher production and depressed global prices. Ind-Ra believes that the sugar prices will continue to be supported by high import duties and depleted sugar stocks.
In terms of cane pricing, the FRP (fair & remunerative price) on sugarcane has been increased to INR 2,550/MT for SS 2017-18. While some of the states which require sugar millers to pay state advised price have not declared cane prices for SS 2017-18, they are likely to continue to be higher than FRP. Ind-Ra expects sugar prices to be remunerative for sugar millers to pay higher cane costs declared for SS 2017-18.
However, owing to the high fixed cost of production, adverse fluctuations in sugar prices significantly impact the ability of millers to pay such prices, as seen over the years. Maharashtra and Karnataka are the only states to have adopted a revenue sharing formula which offers stability in terms of cane pricing.
Ind-Ra expects the financial profile of key sugar producing states of Uttar Pradesh, Karnataka and Maharashtra to remain stable in SS 2017-18 on account of higher production, stable sugar realisations and no-to-minimal impact of cane costs. However, the financial profile of Tamil Nadu based millers is expected to be impacted by higher FRP and lower production and recovery in SS 2017-18.
Ind-Ra also analysed demand-supply scenario, ex-mill prices and regulatory support extended during SS 2016-17. The financial performance of the sample set companies improved in FY17 due to favourable market conditions.
16/11/2017
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Sugar industry in a sweet spot, says Ind-Ra
16/11/2017 14:43
India Ratings and Research (Ind-Ra) has said that it expects sugar prices to remain firm for the majority of SS 2017-18, despite higher production and depressed global prices. Ind-Ra believes that the sugar prices will continue to be supported by high import duties and depleted sugar stocks.
In terms of cane pricing, the FRP (fair & remunerative price) on sugarcane has been increased to INR 2,550/MT for SS 2017-18. While some of the states which require sugar millers to pay state advised price have not declared cane prices for SS 2017-18, they are likely to continue to be higher than FRP. Ind-Ra expects sugar prices to be remunerative for sugar millers to pay higher cane costs declared for SS 2017-18.
However, owing to the high fixed cost of production, adverse fluctuations in sugar prices significantly impact the ability of millers to pay such prices, as seen over the years. Maharashtra and Karnataka are the only states to have adopted a revenue sharing formula which offers stability in terms of cane pricing.
Ind-Ra expects the financial profile of key sugar producing states of Uttar Pradesh, Karnataka and Maharashtra to remain stable in SS 2017-18 on account of higher production, stable sugar realisations and no-to-minimal impact of cane costs. However, the financial profile of Tamil Nadu based millers is expected to be impacted by higher FRP and lower production and recovery in SS 2017-18.
Ind-Ra also analysed demand-supply scenario, ex-mill prices and regulatory support extended during SS 2016-17. The financial performance of the sample set companies improved in FY17 due to favourable market conditions.
