Sugar prices may not stay in sweet spot for consumers next year: ASSOCHAM

Sugar output in the country is expected to be 27 million tonnes in 2015-16 as compared to 28 metric tonnes as estimated earlier in July and almost five percent lower than the actual output of 28.31 metric tonnes, an eight-year high in 2014-15.

According to an ASSOCHAM study, the sweet spot in sugar prices seen this year may not last and the glut in one season resulting in mounting arrears to sugarcane growers and shifting of farmers to other crops would lead to drop in production in the next 6 to 12 months.

The key reasons attributed to loss in production in Maharashtra and Karnataka are lower recoveries and yield losses due to erratic monsoon in 2015. While the drop of around 12 lakh metric tonnes during 2015-16 may not impact domestic situation unduly, what is worrying is the expected drop in sugarcane production in 2016-17.

Some analysts are skeptical about 2015-16 estimate of sugar production and place it close to 25-26 MMT or just sufficient to meet domestic consumption needs.

"Hence, government needs to manage the situation taking into account domestic needs and availability to ensure that sugar prices which have remained low in the current year do not follow the trajectory of pulses and onion next year," said D S Rawat, Secretary General ASSOCHAM.

Already India is heavily short on vegetable oils and pulses and a recurring monsoon failure might push the country into a tight corner in respect of sugar, reveals the study.

"Given the huge domestic demand for sugar, government needs to closely monitor both prices and stock situation. Already a section of global exporting community is evaluating possibility of India entering international market for import of these commodities from 2017, if urgent steps are not taken to augment supplies", added Rawat.

Consequently huge arrears are piling up due to lack of timely payment to cane farmers by the sugar mills. Unless sugar mills clear the dues (payable to farmers) on the cane purchase front farmers might shift to other crops, which in turn will affect sugar production in the country, adds the study.