Local sugar supplies may pip demand in 2023-24, industry estimates

This comes even as there could be a deficit globally

Though there could be a sugar deficit globally in the 2023-24 season, which starts from October, most trade associations, industry bodies and the government believe that domestic supplies may outstrip demand. This scenario is likely even after accounting for ethanol diversion next year.

“We believe if production remains around 31.7 million tonnes in 2023-24, as estimated by us in June, and opening stock is around 5.5 million tonnes, sugar supplies (in India) should be around 37.2 million tonnes. So, consumption could be somewhere near 28 million tonnes. Hence, there is no reason to panic,” president of Indian Sugar Mills Association (ISMA) Aditya Jhunjhunwala told reporters at a press conference.

The production estimate is after accounting for 4.5 million tonnes of sugar diverted towards ethanol.

Jhunjhunwala said that the association would again review its production estimate in October where the impact of late monsoon revival over Maharashtra and Karnataka would be factored in.

The central government, too, believes that net sugar production could be around 30 million tonnes in 2023-24, according to sources. This is after accounting for ethanol diversion while consumption could be somewhere around 28 million tonnes.

Senior officials had, a few weeks back, said the demand-supply situation in the coming season is nothing to be worried about.

“Initially, there were some concerns on the standing sugarcane crop in Maharashtra and Karnataka. But the revival of rains in the last few days should help in salvaging the situation,” a senior government official had told Business Standard a few weeks ago.

He also said that there was enough sugar in the system to meet the demand for the next few months.

Globally, though the International Sugar Organisation (ISO) — in its latest estimate — had pegged the global production at 174.83 million tonnes in 2023-24. This is 1.2 per cent less than the sugar production in 2022-23.

With consumption estimated at 176.95 million tonnes, the global sugar market could be in deficit by nearly 2.12 million tonnes. The deficit projection has pushed up global sugar prices in the last few days.

“ISO has released the sugar balance sheet for 2023-24. As the numbers suggest, world sugar production is seen falling by 1.23 per cent at 174.89 million tonnes. The sugar deficit is seen at 2.1 million tonnes. There are a couple of factors to look into — how the rains play out in India in September and October and its impact on sugar production in the new season. Brazil is talking about a record crop, but the high crude prices can see higher diversion towards ethanol production. The next couple of months are crucial, especially for India. There are reports of sugar export cuts, but these are early days. January 2024 would be an ideal time to take a call for the rest of the season,” Uppal Shah, co-founder and chief executive officer (CEO), AgriMandi said.

ISMA seeks stable ethanol purchase price

The Indian Sugar Mills Association (ISMA) on Wednesday demanded a stable ethanol purchase price and a hike in procurement rate for the 2023-24 sugar season.

This would help unlock additional investments of Rs 17,500 crore needed to create adequate capacities to meet the 20 per cent blending target by 2025.

“Based on our assessment, we demand that the price of ethanol produced from sugarcane juice and syrup be raised to Rs 69.85 per litre, considering the fair and remunerative price (FRP) of Rs 305 per quintal. But, as the FRP has been revised to Rs 315 per quintal, this will require further enhancement of the price of ethanol,” ISMA president Aditya Jhunjhunwala wrote in a letter a few days back.

At present (2022-23 season), the price of ethanol produced from sugarcane juice and syrup is Rs 65.61 per litre.

According to ISMA’s assessment, India needs to produce 12 billion litres of ethanol to meet the 20 per cent blending target by 2025.

At present, the sugar industry has a production capacity of around 4 billion litres. This needs to grow to eight billion litres.  

The total investments made into building this capacity over the last three-four years is around Rs 8,000-10,000 crore. And, another Rs 17,500 crore would be needed to ramp up capacities.