Crisil SME tracker: Govt move on exports to boost revenue for sugar SMEs
The sugar industry anticipates 3% revenue growth in FY25 after the government allowed 1 MMT exports. Prices may rise 1%, reversing an expected 2-3% decline due to high inventory. SMEs, lacking distilleries, could see a 50-80 bps margin boost. The industry seeks an MSP hike from Rs 31/kg, unchanged since 2019, to enhance profitability.
The sugar industry is set for a revenue growth of 3 per cent this financial year following the government’s decision to allow exports of 1 million tonnes (mt) for the ongoing sugar season 2024-25 (SS25, October-September).
The move is likely to boost sugar prices by a moderate 1 per cent.
Earlier, prices were expected to decline 2-3 per cent owing to a higher inventory level of 8.3 mt for the season.
With higher price realisations, small and medium enterprises (SMEs), which primarily operate standalone mills and lack the financial resources to invest in distilleries and power plants, can expect a margin expansion of 50-80 basis points (bps). These units account for nearly half of the sector’s revenue.
Last financial year, the industry witnessed a sharp 10 per cent growth in revenue, driven by an 8 per cent year-on-year (Y-o-Y) increase in sugar prices and a steady 2 per cent rise in consumption. This was despite a ban on sugar exports in the second half as SMEs’ margins expanded due to lower domestic sugar production, which lifted prices.
The industry is also seeking an increase in the minimum support price (MSP) for sugar, which has remained unchanged at Rs 31 per kilogram since February 2019. If the government agrees, the move will further improve sugar realisations and enhance the pofitability of SMEs.
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Source : Business Standard
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