Sugar output seen higher, govt mulls help for industry

Sugar production in India is estimated to go up 25-30% in the sugar year 2017-18

Sugar production in India is estimated to go up 25-30 per cent in the sugar year 2017-18 (the year begins on October 1), with higher sowing of cane and a 11 per cent increase in the government’s recommended minimum price to growers.

However, high production after a year of low output could spoil sugar mills' balance sheets, with a fall in open market prices. The output is estimated to rise from 20.3 million tonnes in the season that ends this September to 26.7 mt in the next one, estimates Rabobank, the Dutch-based financial group. Industry leaders, however, estimate 25-25.5 mt. 

As a preventive, the central government is considering steps to protect the industry and farmers’ realisations. These include a rise in the import duty from the present 40 per cent, a higher ethanol price for supplying to oil marketing companies (OMCs) and reviewing the goods and services tax rates for ethanol and molasses. The import duty rise could come anytime and be up to 20 per cent higher, to ensure no more than the 500,000 tonnes of permitted import takes place. 

Andy Duff, global strategist at Rabobank said, “We see 2017-18 as a year of return to surplus for the global sugar industry, which according to Rabo could be 2.7 mt.” Sugar industry representatives have met food ministry officials and also proposed a higher ethanol price by OMCs, for their petrol-blending programme. 

A mill representative at the meeting said industry data showed the average ethanol cost of production was Rs 44.8 a litre. However, the price for supplying to OMCs had been fixed at Rs 39; hence, against the tender for procuring 2,800 mn litres, mills offered only 800 mn. The industry has also proposed that the GST on it be cut from the present 18 per cent and that on molasses from the present 28 per cent.

Another proposal it made is to reschedule loan payments by sugar mills, saying a higher production meant a lower price for sugar at a time when the price payable to cane farmers had been raised. Ministry officials are said to have given favourable assurances.