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Sugar industry expects to bounce back after price rise, govt measures

The surge in sugar prices follows the central government’s announcements to support the industry weeks before the crushing season few weeks away.

The expected decline in 2019-20 sugar production coupled with the announcement on creation of 4 million tonnes (MT) of sugar buffer stock and subsidy on 6 MT sugar exports resulted in sugar prices rising to Rs 34-34.5/kg (ex-mill Uttar Pradesh), according to a report by rating agency ICRA. Sugarcane is Rs 31.8/32 per kg in Maharashtra against the minimum selling price of Rs 31.

The ICRA raid the government’s measures were likely to result in improvement in liquidity of sugar mills, thus supporting cane payments to farmers as well.

Domestic sugar production is likely to decline to around 28.2 MT compared to 32.9 MT in 2018-19, because of the near-drought in Maharashtra and Karnataka.

“We expect closing sugar stock for 2019-20 at 12-12.5 MT. Despite sugar surplus, the government support measures have resulted in increase in sugar prices,” said Sabyasachi Majumdar, ICRA Ratings senior vice president and group head.

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