NPCI PROPOSES HIKE IN INTERCHANGE FEE

The National Payments Corporation of India (NPCI) has recommended a hike in the interchange fee for cash withdrawals, according to a letter reviewed by Business Standard. This comes when the cash-management industry is facing a surge in additional costs because of security guidelines issued by the Reserve Bank of India (RBI) and the Ministry of Home Affairs (MHA). Interchange fee is the amount charged by ATM operators for every transaction. The MHA guidelines, which include requirements such as GPS-enabled vans, and rules on timing, the number of personnel and their training, came into force on Friday. However, the industry, which comprises banks on both acquiring and issuing side, ATM operators and cash in transit (CIT) companies, is divided over who would bear the additional cost burden. ATM players have been vocal about the interchange fee being lower than the underlying cost of an ATM transaction, especially because of the compliance cost of the additional guidelines. Interchange fee is decided by an NPCI Steering Committee, which primarily comprises banks. NIKHAT HETAVKAR writes

Triggered by a narrow movement in sugar prices, mills are banking largely on ethanol to improve their financial health and remain afloat in the future.

Oil marketing companies (OMCs) have issued a tender for procurement of 485 million litres of ethanol from ‘B’ heavy molasses and 18.4 million litres from sugarcane juice for the current sugar season that began in October 2018.

This additional tendered quantity is set to result into diversion of 0.5 million tonnes of sugar into ethanol, in addition to the existing quantity directly procured from molasses generated automatically from cane crushing.

Apart from the additional quantity of ethanol production and sale, the price increase by the government has helped mills increase their top line and bottom line in December 2018 quarter, and is also likely to continue supporting them in future as well.

“The benefit of upward revision in ethanol prices by the government with effect from December 1, 2018, to ~43.46 a litre should be seen from January-March 2019 and fully during 2019-20 (FY20). Profitability from this segment would increase in the FY20 due to the benefit of higher prices and also higher volumes,” said Abhishek Roy, an analyst with Stewart & Mackertich Wealth Management, a Kolkata-based research and advisory firm.

Roy analysed the Q3 financial performance of Balrampur Chini Mills (BCML). Average realisation from ethanol stood at about ~37.5 a litre last season.

Leading sugar mills in the country, including Dwarikesh Sugars, BCML and Dhampur Sugar Mills, have reported improved revenue generation from distillery segment backed by lower input costs and higher volumes.

Greenfield expansion in sugar mills’ distillation capacity is in various stages of completion which would help them further to ramp up their realisation from this segment.

In fact, the Cabinet Committee on Economic Affairs made 5 per cent of ethanol blending mandatory with petrol for 2013-14 and 10 per cent thereafter. Since then, however, the government has been encouraging sugar mills to increase their ethanol production but, even 6 per cent blending has become impossible to achieve even today.

Data compiled by the apex industry body Indian Sugar Mills Association (ISMA) showed, OMCs require 3,292.61 million litres of ethanol for blending with petrol of which sugar mills offered 3137.32 million litres. OMCs finalised tender to lift 2593.37 million litres of which just 11.61 per cent or 301.10 million litres was supplied so far.

Bhavesh Gandhi, an analyst with YES Securities, said BCML reported robust 30 per cent and 5 per cent increase in distillery volumes and realization, respectively, support from central and state government efforts to cap cane costs offset the fall in sugar realisation.

“While inventory situation is yet to improve, prospect of lower output next year leads us to believe the worst of the sugar glut may be behind,” he added.

A senior official of one of the largest ethanol supplying firms said the fall in realisation from sugar has not only compensated through increase in volume of ethanol, but also added much to the mill’s revenue in December quarter. Further, price increase from December 1 to cushion sugar mills’ revenue and profit further, he added.