Sugar consumption falls in Oct-Dec period

Demand has fallen by 500,000 tonnes because of cash crunch after government's demonetisation move

Indian sugar mills association has revised downwards their estimates for sugar consumption in sugar season 16-17 (October to september) and next fortnight the apex sugar body will be reviewing estimates for production, said ISMA in a note. However, sources said ISMA's earlier estimate of 23.4 million tons of sugar production may have to be revised lower. Union Agriculture ministry has also put their estimate for sugar production at 22.5 million tons.

"The first 3 months of the current season i.e. October-December 2016, has seen a big fall in sugar offtake. With weddings and family celebrations being at low key, and consumption of sugar sweetened products like biscuits, chocolates, beverages, ice creams etc. being lower due to lower availability of currency, there has been a demand destruction of almost 5 lakh tonnes of sugar. Therefore, the sugar consumption in 2016-17 SS, is being cut from 25.5 million tonnes or 2 per cent growth earlier to lower to even last year's consumption of 24.8 million tonnes," it said.

Interesting with average cost of producing sugar going up by Rs.2 per will roughly be higher at around Rs. 35 to 36 per kilo (Rs. 2 per kilo higher a year ago due to higher cane price fixed by various states. But sugar body said Ex-mill sugar prices which dropped by Rs. 2 to 3 per kilo since second week of November, 2016 have started improving and are now at the levels seen a couple of months back. These prices are just enough to cover the costs of production. Prices have moved up in retail market also in last two weeks, following reports of production remaining lower than earlier estimated.

462 sugar mills in the country have produced 8.09 million tons of sugar, which is 0.4% higher as compared to last season.

In Maharashtra, 147 sugar mills commenced crushing operations, however, 25 of the mills have stopped crushing early. These mills are mostly in the drought affected areas of Marathwada, Sholapur and Ahmednagar.

In Uttar Pradesh, 116 sugar mills are in operation.

56 sugar mills in Karnataka are in operation as on December end 5 mills have shut down operations

ISMA is making all efforts to get the debt restructuring plan approved from the government. last week officials met finance minister and convinced his about debt restructuring and now today, their representatives met Commission of Agriculture Cost and Prices vijay pal sharma and also met PMO about restructuring of loans. Following their meeting with Sharad Pawar, Mr Pawar took on the onus of restructuring of loans for private and co operative mills and sought a joint meeting with FM and Food Secy and Jt secy who were also accepted the same line.

Interestingly till cane price is linked with sugar price, as mills have been asking for since long, CACP's recomendation of using price stabilisation fund for compensating mills to the extent of lower realisation due to higher cane price fixed by some states shall be considered, a mill owner from Telengana said.

Due to draught in previous sowing season in western and southern areas, production will be lower which will affect their revenues and falling consumption and higher cost of production so far will have an impact on their balamce sheets, said a south based mill owner. Official of another big mill said that by any chance of government is thinking of importing sugar, "it will be an absolute disaster for the industry !!". This is because import along with much higher estimated production next year will increase mills' cane arrears and farmers realisations will suffer.

All these developments have created euphoria in stock prices of sugar mills.