Sugar production is likely to rise 13% to 310 lakh tonnes this year, even as 106 lakh tonnes are still available from the previous year, according to the industry estimates.
A significant increase in exports and ethanol diversion is needed to stave off a renewed liquidity crisis, which could jeopardise payment of dues to cane farmers.
The sugar season runs from October to September. In its first advance estimates for the 2020-21 season released on Monday, the Indian Sugar Mills Association (ISMA) said it expected 330 lakh tonnes of sugar production based on total cane expected to be crushed by mills this season. However, it also expects that the diversion of cane juice and B-molasses to ethanol production will result in the loss of 20 lakh tonnes of sugar, ending up with 310 lakh tonnes.
This is 13% higher than last year’s production of 274 lakh tonnes, driven largely by a 48% increase in Maharashtra’s net cane plantation area. Among other major sugarcane-growing States, Karnataka and Gujarat have also seen some increase in crop area, although Uttar Pradesh and Tamil Nadu saw marginal decreases. Monsoon rainfall has been good in most States, and reservoirs are full, leading to high production expectations.
However, the remaining sugar stock from the previous year is at 106 lakh tonnes, which is 55 lakh tonnes more than the domestic requirement for the next few months before the new season’s sugar production becomes fully available in the market. “Since we expect much higher production in 2020-21 SS, India will need to continue to export about 60 lakh tonnes of the surplus sugar out of the country during 2020-21 SS,” said ISMA.
High production and surplus stocks tend to drive down prices, resulting in mill owners delaying payment of dues to cane farmers. In Uttar Pradesh alone, arrears to farmers had crossed ₹8,000 crore even before the beginning of the new season. Over the last few years, the Centre has taken steps to incentivise exports and ethanol diversion in a bid to reduce stocks and improve liquidity.
