India's Maharashtra proposes buying quarter of state sugar to support prices

Riga Sugar

06/02/2018 10:47

By Rajendra Jadhav 
    MUMBAI, Feb 6 (Reuters) - India's second-biggest sugar 
producer Maharashtra plans to buy a quarter of the state's 
output to arrest falling prices for the sweetener, a state 
minister told Reuters, a move that would require $1 billion and 
leave mills to cover storage costs.  
    The government purchase plan - which the state would need to 
approve in the next cabinet meeting - would help Maharashtra 
sugar mills pay dues to sugar cane farmers that have risen to 
more than 30 billion Indian rupees ($470 million).   
    "We are planning to buy 25 percent of the sugar production 
of each mill. The government buying will reduce availability in 
the market and prices could rise," said Subhash Deshmukh, the 
cooperation and marketing minister for the state government.  
    India, the world's second-biggest sugar producer, requires 
mills to pay cane farmers within two weeks of harvest. Last 
year, the mills agreed to pay farmers 11 percent more for their 
cane for the 2017/18 marketing year than in the previous year.  
    But local sugar prices  SUG-ARMKHP-NCX  have fallen 17 
percent since the start of the marketing year on Oct. 1, making 
it difficult for the mills to make payments.  urn:newsml:reuters.com:*:nD8N1IK001  
    A few industry officials are sceptical about the plan, not 
least because of the cost to the state.  
    Maharashtra's sugar output is expected to double to 8 
million tonnes in the 2017/18 marketing year ending on Sep. 30, 
according to the Western India Sugar Mills Association (WISMA).  
    That means the government would spend nearly 64 billion 
rupees - almost $1 billion - assuming it buys nearly 2 million 
tonnes from the mills, said WISMA President B.B. Thombre. 
    "Government intervention is required, but I don't think the 
state can allocate such a huge amount for sugar buying," said 
another industry official, who declined to be named as the 
government's plan has not been approved yet.  
    The mills have to store any sugar bought by the government 
in their warehouses until the state liquidates the stocks in the 
open market, Deshmukh said.  
    "The government will not pay for storage and it would be the 
mills' responsibility to keep the stocks in good condition," he 
said.  
    Some sugar dealers said Maharashtra's purchases could prop 
up sweetener prices across the country and help producers like 
Shree Renuka Sugars  SRES.NS , Balrampur Chini Mills 
Ltd  BACH.NS , Dwarikesh Sugar Industries  DWAR.NS  and 
Simbhaoli Sugars  SIMB.NS .  
     
    ($1 = 64.1700 Indian rupees) 
 
 (Reporting by Rajendra Jadhav 
Editing by Tom Hogue) 
 ((rajendra.jadhav@thomsonreuters.com; +91-22-6180-7153 ; 
Reuters Messaging: 
rajendra.jadhav.thomsonreuters.com@reuters.net)) 
 
Keywords: INDIA SUGAR/STATE