New Delhi: Indian mills are likely to produce 20.3 million tonnes of sugar during 2016-17, the lowest in seven years and about 19% lower than the 25.1 million tonnes produced the year before, according to revised estimates released by the industry lobby Indian Sugar Mills Association (ISMA) on Tuesday.
The industry forecast for 2016-17 is lower than the government estimate of 22.5 million tonnes.
The latest production estimate—5% lower than ISMA’s earlier estimate released in January and 13% lower than what was estimated in September last year—implies sugar prices may rise in the coming months, which could force the government to cut import duties. The sugar season begins in October and lasts until September.
Data from the price monitoring cell of the consumer affairs ministry shows that retail sugar prices in Delhi have risen to Rs42 per kg from Rs37 per kg over the past year. Currently, India, the second largest producer of sugar after Brazil, imposes a 40% duty on sugar imports.
In January and February cane yields in states such as Maharashtra and Karnataka were severely hit by drought, forcing mills to shut earlier than usual, ISMA said in a statement, adding, “In some areas, the yield per hectare in the month of February 2017 was 40-50% lower than last year.”
However, despite the sharp drop in production, the next sugar season (2017-18) will begin in October with an excess stock of around 4.2 million tonnes. These stocks will be enough to meet domestic demand till new sugar is crushed, ISMA said, ruling out the need to import the sweetener.
According to ISMA, sales of sugar have also come down in the past months due to factors like demonetisation, higher prices and the centre’s proposal to cut subsidies on sugar supplied under the public distribution system. Sugar sales (consumption) are expected to be between 23.8 million tonnes to 24 million tonnes this year, ISMA said, lower than the 24.8 million tonnes last year.
India’s sugar production fell from a high of 28.3 million tonnes in 2013-14 to 25.1 million tonnes in 2015-16, and hit a seven-year low of 20.3 million tonnes in 2016-17 following consecutive years of drought (in 2014 and 2015). In 2009-10, India’s production fell to 18.9 million tonnes following widespread drought, forcing the country to import over 4 million tonnes of sugar.