INDIA: ICRA says current crop sugar production could increase to 24.5 million tonnes

Published: 08/31/2017, 2:52:13 PM

Domestic sugar production for the 2017/18 marketing year ending September is likely to increase by 18%-20% to around 24-24.5 million tonnes mainly driven by recovery in cane availability supported by monsoons, ICRA said in a report, according to the Press Trust of India.

"Domestic sugar production for SY18 (sugar year) is likely to rise by 18%-20% to around 24-24.5 million tonnes, driven by a recovery in cane availability in Maharashtra and North Karnataka supported by monsoons and an expected increase in sugar output in Uttar Pradesh to new high of around 9.7 million tonnes," the report said.

However, it said, the sugar production in south Karnataka and Tamil Nadu is likely to remain impacted by consecutive seasons of poor rainfall. This along with increase in the cane costs due to higher fair and remunerative price (FRP) in SY18 might impact the performance of the sugar mills located in these regions.

"Despite increase in sugar production, the same would at best be at the same level as our estimate of consumption of around 24.5 million tonne in SY18. Thus, the low closing stock of sugar in the domestic market are likely to support the prices in the near term," said ICRA Ratings Senior Vice President and Group Head Sabyasachi Majumdar. In terms of profitability, the south-based mills especially those in Tamil Nadu and South Karnataka are likely to be adversely affected in FY18, it said.

This is due to continued drought, which is expected to significantly impact their cane availability in SY18 and the increase in the cane costs for SY18, it added. While mills in Maharashtra and North Karnataka are likely to be impacted by higher costs, they are likely to benefit out of the higher production, Majumdar said. ICRA said, as far as UP-based mills are concerned they will be benefited by the sugar prices along with continued healthy volumes and recovery rates, although that impact could be partly offset by higher cane prices, which is yet to be announced.

ICRA estimates SY17 to end with a stock between 4-4.5 million tonne, which is likely to be sufficient for around two months of domestic consumption. However, there is a possibility of a localised sugar deficit condition in the southern and western states during the forthcoming festival season, it added. "While the shortage in the west is likely to be mitigated by early commencement of cane crushing, the deficit in the south might be handled by way of imports from the west and north India," added Majumdar.