The hike in minimum selling price of sugar by 7% to Rs 31 per kg from Rs 29 per kg, approved by the union cabinet last week, is expected to address the profitability and liquidity issues of sugar mills, and ease their cash crunch, thereby enabling payment of accumulated arrears to sugarcane farmers.
The hike, though, would be applicable to only the seven-and-a-half months remaining in sugar season (SS) 2019, which extends from October to September.
Given this, CRISIL estimates the rise in domestic sugar prices to add Rs 3,200-3,400 crore to millers’ cash-flows. An increase in international sugar prices would add a further Rs 100-200 crore, taking the total fillip this season to Rs 3,400-3,600 crore.
Even standalone mills are expected to break even in SS 2019, given the pick-up in sugar prices.