Cash crunch dampens India's sugar demand - industry body

MUMBAI (Reuters) - India's sugar consumption in 2016/17 is likely to remain steady while the government's move to scrap high-value currency notes has affected demand, a leading industry body said on Friday.

The country's sugar consumption in the new season, which started on Oct. 1, is estimated to be between 24.5 million tonnes and 25 million tonnes, compared with 24.8 million tonnes a year ago.

The industry body had earlier expected consumption to rise to 25.5 million tonnes during the year. India is the world's biggest sugar consumer and second-biggest producer.

"Market sources suggest that sugar sales in the first fortnight of December 2016 have been badly affected and the depressed demand may continue till January 2017," the Indian Sugar Mills Association said.

Last month, Prime Minister Narendra Modi scrapped 500 and 1,000 rupee banknotes, or 86 percent of the value of cash in circulation, as part of a crackdown on corruption, tax evasion and financing militants.

Indian sugar mills produced 5.33 million tonnes of the sweetener between Oct. 1 and Dec. 15, over 11 percent higher than a year ago, as mills in the northern state of Uttar Pradesh started crushing earlier, it said.

The country is likely to produce 23.4 million tonnes of sugar in 2016/17, down about 7 percent from a year ago as back-to-back droughts ravaged the cane crop in top-producing state of Maharashtra.

(Reporting by Rajendra Jadhav; Editing by Sherry Jacob-Phillips)