With a sharp increase in output in the first three months of the current cane crushing season, the Indian Sugar Mills Association (Isma) has raised the country's production forecast by four per cent or one million tonnes to 26.1 mt for 2017-18 (October-September).It has also begun lobbying with the government on early measures to check a likely fall in prices, suggesting opening the door for export. Total sugar production was reported at 10.33 mt in the December quarter this year, compared to 8.19 mt in the same period last year. Annual sugar consumption is estimated at 25 mt. The additional one mt of output, in addition to the carryover stock of nearly four mt from the earlier season, would worsen mills’ financial health this year, say observers. “On the basis of satellite images of harvested and unharvested area, the trend of yields and sugar recoveries till now ,as also expected yield/sugar recovery in the balance period of the season, we have revised the sugar production estimate," said Isma. Another industry body, the All India Sugar Traders Association, had earlier forecast output at 25.7-26.1 mit. In the 2016-17 season, ended September 30, 2017, mills had sold around 24.6 mt. Isma says the revised figure leaves room for export but the government is unlikely to allow this for now, with Tamil Nadu for one facing a shortage due to lower cane availability. Last year, the government had allowed import of 0.8 mt of raw sugar, with supply focus in Tamil Nadu and Karnataka. India’s total output was recorded at 20.3 mt. With the cost of production around Rs 37 a kg this year as against Rs 33-33.5 last year, due to a rise in labour cost and government levies, mills’ realisation is estimated at Rs 30-31 a kg. Isma says this is a loss of Rs 6-7 a kg.
There is also an import threat from Pakistan, where sugar is offered at a third of India's price with export incentives. Despite a 50 per cent import duty levied by the Indian government, the parity works in favour of import in the border area of Punjab. Considering the additional availability expected of 1-1.1 mt over the domestic requirement, Isma members have met officials in the Union food ministry on the need to dispose of some of the additional stock. “India’s sugar mills have proposed the government initiate negotiations with Bangladesh and Sri Lanka, which cumulatively consume nearly 3.5 mt annually. If we tap these markets on a bilateral basis, as they import currently from Pakistan and Thailand on a preferential treatment basis, we would be able to supply our entire surplus sugar to these deficit countries,” said Abinash Verma, Isma director-general. Dilip Walse Patil, president of National Federation of Cooperative Sugar Factories, on Thursday met the joint secretary (sugar) along with other industry representatives and cautioned him about the threat the sugar industry is facing because of sharply higher production which is estimated at 26 million tonnes (mt), 30 per cent higher that last year. Patil said this could affect the next crushing season and the government should take immediate corrective action to protect the industry and sugarcane farmers. He suggested a ban on sugar imports, encouraging exports and creating buffer stock of 2 mt of sugar.