Sugar production is expected to be lower at 260 lac tonnes

Indian Sugar Mills Association (ISMA) in its recently held Committee meeting reviewed the situation of sugar production for the sugar season 2015-16 and observed that market sentiment would improve.
Sugar production is expected to be lower at 260 lac tonnes

The current improvement in market sentiments is mostly because of the fundamental reason that sugar production is expected to be lower than the last year due to lower water availability in Maharashtra and Karnataka and the fact that the sugar mills are exporting sugar and reducing the high sugar stocks that they are carrying, according to the ISMA advance estimates. The sugar industry body has revised its estimates of sugar production in 2015-16 SS from 270 lac tons to 260 lac tons.

As per practice, ISMA procured satellite images of area harvested for crushing upto 9th January, 2016 and the area under sugarcane which is yet to be harvested in the remaining period of the season.

The factors like yield per ha., estimated sugarcane production from the remaining area, drawal of cane for sugar production, sugar recovery and water availability in reservoirs have been duly considered while making revised analysis for the second advance estimates, the ISMA said.

According to the estimates, sugar production in Maharashtra is likely to be around 87 lac tons, lower by 3 lac tons as compared to the first advance estimates of 90 lac tons made in September, 2015. This is mainly because of lower water availability which adversely affected yields in Maharashtra.

Cane area under the new cane variety Co 0238 has increased substantially during the current 2015-16 SS i.e. from 1.7 lac ha. to over 4 lac ha., which gives better yield and recovery as compared to other early and regular maturing varieties. Sugar recoveries in UP are expected to be much better than previous years. Hence, sugar production in Uttar Pradesh would be around 71.5 lac tons. This is 0.50 lac tons higher than the sugar produced in 2014-15 SS.

Sugar production estimated for Karnataka by ISMA in the 1st advance estimates was 49.2 lac tons. Due to lower rainfall in Northern Karnataka, the yields are not as good and, therefore, it is estimated that sugar production will be 43 lac tons.In case of Tamil Nadu, as against the last season’s production of 12.6 lac tons, mills in the State are likely to produce 13.9 lac tons in the current season.

As regards Andhra Pradesh & Telangana and Madhya Pradesh, sugar production in 2015-16 SS is likely to be less by 0.50 lac tons each, as compared to the first advance estimates released in September, 2015.

The current average all India ex-mill sugar prices are at around Rs. 2950 per quintal of sugar. It has improved in the last few months but has still not recovered to the levels that were prevailing about 18 months back in July-August 2014.

The average cost of production on an all India basis, based on the cane price that the mills have to pay is currently between Rs. 3300 and 3500 per quintal of sugar (including cost of finance) . The sugar mills are, therefore, still unable to cover their costs. It is, therefore, feared that if the current ex-mill prices do not improve to allow them to cover their costs, there would be additional cane price arrears of farmers and defaults in repayment of bank loans. Cane price arrears of previous season as on today is around Rs. 2500 crore.

ISMA said that the ex-mill sugar prices need to improve to the level of the cost of production to ensure that the sugar mills are able to at least break even and at the same time is able to pay the cane price to farmers on time and repay the bank loans to avoid NPA and sickness.  

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