Indian sugar mills make distress sales to pay farmers

miércoles 11 de febrero de 2015 01:16 GYT

By Rajendra Jadhav

MUMBAI Feb 11 (Reuters) - India's cash-strapped sugar mills, waiting on the government to approve export subsidies, are being forced to dump supplies in the domestic market to raise cash to pay cane farmers, pulling down local prices to 4-1/2 year lows.

The aggressive selling comes as production exceeds demand for a fifth straight year and is set to deepen losses for producers like Bajaj Hindusthan, Shree Renuka Sugars Ltd and Balrampur Chini Mills.

Without any government incentive, Indian sugar is uncompetitive in world markets well supplied by low-cost producers Brazil and Thailand.

India, the world's second-biggest sugar producer, exported more than 1 million tonnes of raw sugar in 2014 but has shipped out little in the current season that began on Oct. 1.

"Mills don't have a choice," said Ashok Jain, president of the Bombay Sugar Merchants Association (BSMA). "On the one hand the sugar commissioner is asking them to pay farmers cane dues quickly, on the other hand demand is weak for sugar."

Each year the federal government and states fix the price at which mills can buy cane from farmers. The cane price has climbed 65 percent in five years, while sugar prices have fallen 8 percent.

Some co-operative mills from the western state of Maharashtra, the biggest producer, sold sugar at 2,460 rupees ($40) per 100 kg this week, the lowest level since August 2010.

"Cost of production is higher than current sugar prices. Mills are not able to pay the stipulated cane price," said Sanjeev Babar, managing director of Maharashtra State Co-operative Sugar Factories Federation.   Continuación...