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Sugar prices may rise by Rs 2 per kg after April on supply constraints in the wake of expected fall in domestic output of the sweetener, rating agency ICRA has said.
While sugar mills are likely to benefit from steady sugar and by-product realisation, growth in cane prices will impact profits of sugar mills adversely in the ongoing 2012-13 marketing year (October-September), it noted.
Pegging country's overall sugar output at 23-24 million tonnes and consumption at close to 23.5 million tonnes for this year, ICRA said that domestic prices could firm up due to supply pressure in the second half of this year as extra stocks would be 6 million tonnes sufficient to meet three months demand.
"Given the production decline, ICRA expects a marginal increase of Rs 1,000-2,000 per tonne in the second half of 2012-13 from current levels," it said.
Currently, ex-mill price of sugar is Rs 31-32 per kg, while rates in the retail market are ruling at Rs 40 per kg.
In the medium terms, ICRA said sugar price trend will continue to be determined by three factors.
"Firstly, the domestic sugar balance. Secondly, the global crude oil prices, which will determine the raw sugar: ethanol mix in Brazil, the worlds largest producer and exporter; and finally, government's policies regarding exports of sugar and import duties."
Last year, sugar production stood at 26 million tonnes.
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