An abrupt change has been witnessed in the mode of repayment by sugar mills in Sindh against loans obtained by them from the banking sector to meet their financial requirements every year.
To meet their financial requirements mills obtain funds from commercial banks and DFIs before they start seasonal operation every year. The mark-up rate ranges between 6 and 8 percent.
Sindh sugar mills total requirement annually is roughly estimated over Rs 3 billion. There are about 27 mills in the province. They repay this amount usually in September-October. This year they have started payment immediately, reportedly due to record fall in the prices of the commodity.
According to financial circles, the managements of the mills do not expect that the prices would pick up soon. Therefore, they would sustain continuous losses and the outstanding loans would increase following these losses.
Therefore, the stocks are being unloaded in the market directly and the sale proceeds are being used as their financial requirements. The loan amounts are being used mostly in repayment.
As such the banks and DFIs are not earning their usual profit. It means that they are unable to earn the profit as they usually earned every year. Early repayment reduces the mark-up amount, sources said.
The ex-mill price of sugar is down so much that it has touched the figure of about Rs 15 per kg. Wholesalers business is down, according to sources.