Ponni Sugars (Erode): Expect losses in FY14 on lower cane availability

Riken Mehta
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Ponni Sugars (Erode), a sugar manufacturer in Tamil Nadu, reported a loss of Rs 6.64 crore in the quarter ended June 2013. Sales declined 16 percent to Rs 28.27 crore in this quarter compared to Rs 33.53 crore in the same period.

“The crushing and co-gen operations were severely impacted in this quarter on account of drought. The cane availability was also very low in the quarter gone by,” told K Yokanathan, CFO at Ponni Sugars (Erode)  in an exclusive interview to moneycontrol.com.

Guidance

“We expect cane volumes to drop by 50 percent this year compared to last year. The second quarter will be better compared to the first quarter. We don’t expect much of an up tick in the third and fourth quarter.  Unless the cane volumes don’t improve significantly we expect the company to post losses in FY14,” said Yokanathan.

Partial sugar decontrol

“We will not benefit much from the partial sugar decontrol done by the government. No levy obligation on the sugar mills for 2 years was the only positive for the company. The cane pricing issue needs to be resolved.”

Cane pricing

“The company paid Rs 2400 per tonne for cane in the sugar year 2012-13 (till September 30, 2013). The new SAP price will be declared by the government for sugar year 2013-14 starting from October 1.

Cane pricing needs to be implemented as per the Rangarajan Committee where in cane prices will be fixed at 75 percent of the sugar price realization ex-mill. This will benefit farmers as well as the manufacturers and it will lead to better realizations, volumes and higher cane availability,” he added.

Ethanol blending

“Currently, we have no operations in ethanol blending. We are planning to set up a distillery in one or two years. The government needs to lift the ban from 5 percent to 10 percent for ethanol blending,” said Yokanathan.

Co-gen

“We use baggase only for co-gen production so the co-gen will pick up in the second quarter since crushing has resumed. The sugar recovery rate was close to 10 percent,” concluded Yokanathan.

Indian Government decontrols sugar: 7 things you need to know

Nasrin Sultana, Riken Mehta
Moneycontrol.com

Cabinet Committee on Economic Affairs (CCEA) on Thursday finally decided to decontrol sugar with certain riders. The sugar industry was the only industry left under the government control. It is learnt that the decontrol is largely in line with recommendations made by the Rangarajan committee . 

What does decontrol mean?

1. Decontrol means no government control. It will no longer force mills to sell sugar to the government at a discount and wont put a limit on the amount that they can sell in the open market.

2. No levy obligation on sugar mills for 2 years. Levy sugar is the amount of sugar set aside from the total production for Public Distribution System (PDS). In levy sugar system, millers were required to contribute 10 percent of their output to the Centre for running ration shops at cheaper rate. This costed the industry Rs 3,000 crore a year, an amount sugar industry will now be able to save.

3. Release order mechanism by which government directed sugar companies as to when, how much to release sugar now goes away.

4. The government will buy sugar from the open market at market rates and subsidise it to PDS. The government will pay the difference between ex-mill and PDS price. Cabinet fixed the price of levy sugar at Rs 13.50 a kg in 2002 and it was never changed since then. 

5. The government will bear Rs 5300 crore PDS sugar subsidy.

6. No hike in excise duty on sugar. Currently it is Rs 95 per quintal

7. Ex-mill sugar price will be capped at Rs 32 per kg for PDS

The government maintained that the decision will not lead to any rise in retail prices of sugar. However, it would double the government's subsidy burden to Rs 5,300 crore annually from about Rs 2,600 crore.