INDIA: Millers selling below production cost
Published: 03/08/2010, 9:06:27 AM
Sugar makers in India are selling below cost of production as government measures to increase supplies have pushed domestic prices to a four-month low, according to Bloomberg.
The government extended duty-free purchases of white sugar until Dec. 31, ordered bulk consumers to hold inventories for no more than 10 days from 15 days earlier, and asked mills to sell on a weekly basis from fortnightly sales earlier, to cool record domestic prices that have fueled food-price inflation.
"These are the highest curbs I've seen been put on the free-sale of sugar in the last 25 years," said Vivek Saraogi, president of the Indian Sugar Mills Association and managing director of Balrampur Chini Mills Ltd., the country's second- biggest producer, in an interview. "The industry feels very pinched by this. Everything is out of the window for us."
The slump in domestic refined sugar rates may reduce the ability of the mills to pay farmers record cane prices for a second straight crop year starting Oct. 1.
The measures "hamper future prospects in terms of keeping India self-sufficient," said Saraogi. "If you lower prices like this, cane prices will suffer next year."
Mills in the northern state of Uttar Pradesh, the country's second-biggest producer, are selling at INR33 (US$0.73) a kilogram, less than the production cost of INR37-INR38, said M.N. Rao, deputy director general of the association. The cost in Maharashtra, the nation's largest producer, is INR30 a kilogram compared with the sale price of INR28-INR29 rupees, he said.