Decontrol to boost sugar companies’ profits by 50 %: CRISIL
25 Oct 2012
The profitability of sugar companies rated by by ratings agency Crisil will increase by Rs600 crore in FY 2012-13, if the recommendations of the C Rangarajan Committee pertaining to full decontrol of the sector are implemented.
In a sector report, Crisil said, "This represents a 50 % increase in profits for the rated companies over their estimated profits under the current regulated scenario, and will strengthen their credit risk profiles."
it said, sugarcane farmers, too, stand to benefit from decontrol through reduction in cane arrears and share the upside in sugar prices. These are the findings of a study conducted by CRISIL on 47 of its rated sugar companies.
An expert committee headed by Dr CRangarajan has recommended full decontrol of the sugar sector.
The recommendations include abolishing state-advised cane prices (SAP) and removal of regulatory control on the sale of sugar in the domestic market, of quantitative restrictions in international trade and of mandatory jute packaging.
Says Subodh Rai, senior director, bank loan ratings, Crisil, ''Decontrol will improve players' cash flows, reduce their working capital requirements, and thereby strengthen their credit risk profiles.''
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