New Delhi: As wholesale sugar prices touched Rs 43.50 a kg in the national Capital, mills are raking in profits to the tune of 25 per cent on its sale citing dearer imports, even though the effective cost of producing sugar domestically is just Rs 32 a kg.
"There is a big gap between demand and supply of sugar in India and much of the gap is filled in by imports. The prices of imported sugar are rising sharply," Indian Sugar Mills Association (ISMA) Deputy Director General M N Rao said on Thursday.
In the last one week, the prices of white sugar in global markets have surged by $20-25 a tonne, which works out to a landed cost of $800 (Rs 36,664) a tonne in India, he added.
In the domestic wholesale market, sugar prices increased by about Rs 6 a kg in the last one week. However, the irony is that while the domestic cost of sugar production is around Rs 32 a kg, millers are charging Rs 40 a kg, which is the price at factory gate, in sync with higher rates in global markets.
Late last month, ISMA President Vivek Saraogi had said that the effective cost of producing one kg of sugar is Rs 31-32 a kg, taking into account the increased cost of sugarcane and rise in levy quota (sugar meant for ration shops) from 10 per cent to 20 per cent.
The ex-mill price should be at least Rs 35 a kg so that the mills earn at least 10 per cent profit, Saraogi had said.
India is estimated to produce 16 million tonnes of sugar in 2009-10, while it needs 23 million tonnes for its annual consumption. The gap is to be bridged through imports.
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