Molasses prices seen easing out

Mumbai, June 24 | Updated: Jun 25 2005, 05:51am hrs
Liquor companies can breath easy following indications of molasses prices easing out. Prices have now dropped to Rs 4,000 per metric tonne in Maharashtra and Rs 3,000 per metric tonne in UP in anticipation of bumper sugar crop.

Molasses prices had peaked to around Rs 6,000 per metric tonne in Maharasthra in May 2005 from Rs 2,200 per month in May 2004. It had also moved to Rs 5,600 in UP and Rs 6,500 in Kerala from Rs 1,850 and Rs 3,400 during the same period.

Radico Khaitan managing director Khaitan said, Molasses prices have already started coming down and the peak prices are already behind us.

The prices in India had firmed up following failure of sugarcane crop last year following drought condition. This development contributed to the escalation in molasses prices globally from $30 million to $110 million per metric tonne at CIF Indian port. For Radico Khaitan, molasses constitute 27% of the raw material cost, while for UB, it accounts for 8-10% of the end consumer prices. Government taxes continue to be 60-70% of the end consumer price. However, liquor consumers may not expect the end prices to come down as both UB and Radico have already passed on the hike in molasses prices to the consumers. The industry has come together to effect price increase in various states to compensate molasses price increase, Mr Khaitan said. Radico Khaitan had increased the end product prices by 7-8% but it varies in different markets.

UB too has been a frontrunner in increasing realisations from customers in all the three markets, according to UB Group president and chief financial officer Ravi Nedungadi. He, however, admitted that there has been an impact on the margin due to timing gap between cost escalation and realisation through price increase. The liquor market in India is estimated at 84 million cases with foreign brands accounting for two million cases.