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Favourable sugarcane prices and ability to tap export markets have put sugar mills in the South and West on a better pitch than their counterparts in the North.
According to a report by rating agency ICRA, in the 2011-12 sugar year (September-October) profitability of the mills in Uttar Pradesh, in the North, will be worst affected as sugar cane prices are at a high.
The mills are also facing the need to make sugarcane payments due in 2006-07 and 2007-08 following a Supreme Court ruling.
These arrears alone amount to over Rs 1,000 crore.
Disadvantage u.p.
Sugarcane prices in U.P. are at a high against the backdrop of a surplus sugar production and subdued sugar prices in the domestic market.
Sugar cane prices are at a high of Rs 2,400 a tonne as compared with Rs 2,050 last year. Comparatively, in Tamil Nadu the sugarcane price this season is Rs 2,100.
The mills in U.P. also do not have the option to export sugar because they are landlocked and are at a logistical disadvantage.
Prices unchanged
ICRA predicts that with the output estimated at 255-260 lakh tonnes in the current season against a domestic consumption of 230 lakh tonnes, prices will continue to be subdued. No major changes in prices are likely as compared with the last year and a half when it has ranged around Rs 27,000-30,000 a tonne.
Global scenario
The current year's production which is 6-7 per cent higher than last year's is the second year of surplus output.
With the Government allowing export of 30 lakh tonnes to balance the supply, mills that have the option to sell to overseas markets are better off.
International sugar prices have been volatile and are now subdued following the export of Indian sugar.
In 2010-11 the global sugar output matched consumption at about 167 million tonnes.
With major sugar producers such as India and Thailand reporting buoyant output, prices have dropped from about $784 a tonne in January 2011 to about $650 in December 2011.
In the current season output will exceed consumption by about 5 million tonnes, says the report.
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