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Indian sugar mills face glut challenge

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Indian sugar mills face glut challengeIndia’s sugar production rose 49% on year to 28.18 million tonnes in the first half of the current sugar year, the Indian Sugar Mills Association said in its latest update on Tuesday.

Sugar production in India, the world’s second-biggest producer after Brazil, is set to hit a record at 29.5 million tonnes in 2017-18, up 45% from the previous year.

India’s sugar year runs from October to September.

The national sugar industry body ISMA said mills have been facing a tough situation in clearing dues to cane growers due to poor price realization in domestic markets and depressed global prices.

Last week, mills were allowed to export 2 million tonnes to tide over a glut in the domestic market.

Two and half year low global prices due to record output projections in leading producers India and Thailand have put pressure on domestic mills’ prospects to sell overseas.Indian sugar mills face glut challenge

India recently scrapped a 20% export tax on sugar to make the option of overseas sale attractive to mills that have been battling with low price realization due to gluts.

India, the world’s top sugar consumer, demands 25 million tonnes a year.

ISMA’s latest updates on sugar production:

1. At the end of first half of the current sugar year, 193 mills stopped crushing while 331 mills remained operational. A total of 524 mills reported crushing operations since the start of the season in October.

2. Maharashtra, Uttar Pradesh, and Karnataka were the top three sugar producing states in the first half.

3. A total 187 mills in Maharashtra produced 10.13 million tonnes. Until March end, 81 mills closed cane crushing.

4. Mills in Uttar Pradesh produced 9.54 million tonnes in the first half. Presently, 111 mills are operational.

5. Mills in Karnataka produced 3.6 million tonnes during October-March. Out of 65 mills, only 6 mills are operational as 59 mills have closed operations for the current season.

6. Prices have come down below the cost of production by Rs 500-Rs 600 per 100 kg due to excess supplies in markets.

7. The Indian government has allowed 2 million tonnes of exports to cut oversupply.

8. Sugar importers offering $350 per tonne Free on Board (FoB) basis at Indian ports.

9. Mills arrear to cane growers for 14 days ranged Rs 160-170 billion. The top three producers own the lion share of the cane arrear. In Uttar Pradesh, mills owe Rs 72 billion to cane growers, followed by Maharashtra and Karnataka at Rs 25 billion each.

10. Mills have been facing challenges in paying cane dues due to depressed global prices and low realization in domestic markets, the national sugar body said.

 

Ratnajyoti Dutta

The author is Bigwire’s New Delhi based Consulting Editor.

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