Sugar production in India to cross record 30 mt, prices under pressure

Sugar production in India is set to far exceed 30 million tonnes (mt) in 2017-18 (October-September). 

Till April 15, it crossed the production estimate of 29 mt and mills produced 29.98 mt, according to Indian Sugar Mills Association (Isma). 

Two-hundred and twenty-seven sugar mills are still crushing cane, which means production will be much higher in the sugar season.

Isma stated in a release on Tuesday that with rise in production and supply, prices had come under severe pressure, and compared to the cost of production, the current ex-mill sugar prices were around Rs 8 per kg lower, and sugar mills were incurring losses.

As a result, the cane price arrears have surged to over Rs 180 billion by April 15 and sugar prices have further fallen in the past few days.

Sugar prices in October were Rs 36-37 a kg, from where they fell by Rs 8-9 per kg.

With falling prices, sugar companies’ share prices have crashed. 

The BSE Sensex is up 8.92 per cent since October but the BS index of sugar companies has fallen by 30.09 per cent, significantly under-performing the broader market.

The government placed stockholding limits on sugar mills earlier and allowed exports of 2 mt under quota but this could not counteract the trend of falling prices.

Isma has calculated that, in accordance with the Rangarajan Committee formula (proposed five years ago and the industry is still pushing for it because it proposes linking sugar prices to cane prices payable to farmers), sugar mills can pay around Rs 230 per quintal of sugarcane (at 10.8 per cent recovery) whereas the fair and remunerative price (FRP) is Rs 290 per quintal.

“Mills are unable to pay this price … there is an immediate need for the government to pay part of the FRP …,” said Isma.