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India sugar production may up by 12% to 30.5 mn MT in SY2021: Icra

Higher cane availability in Karnataka and Maharashtra is expected to boost sugar production next season. In Maharashtra, production is expected to increase by 64 per cent year-on-year at 10.1 million tonnes and in Karnataka, by 26 per cent Y-o-Y to around 4.3 million tonnes in SY2021.In UP, production is likely to decline by 3 per cent Y-o-Y to 12.3 million tonnes.

Source: BS | 25 July, 2020 | 12:38 PM

The domestic sugar production is likely to go up by 12 per cent to 30.5 million tonnes during the sugar year 2021, beginning October, due to higher product ion of sugarcane in Maharashtra and Karnataka, which was adversely affected in previous year due to drought and heavy rainfall in some regions, according to a report of ICRA (Investment Information Credit Rating Agency).

The sugar production in India is likely to increase by 12.1 per cent to 30.5 million tonnes year-on-year in sugar year (SY) 2021, after adjusting for the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture, Icra said in a report.

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Highlights of the ICRA report states:-

  1. Icra expects the closing stocks for SY2020 at around 11.0 – 11.5 million tonnes after considering the consumption of 25 million tonnes (decline of 3.8 per cent year-on-year) and exports of 5-5.5 million tonnes.
  2. Along with higher sugar production in SY2021 is likely to result in domestic sugar availability of around 42 million tonnes.
  3. In the light of the continuing sugar surplus scenario in the domestic market, continued government support would be critical for industry’s profitability, it added.
  4. The closing stocks are expected at around 10.5-11.0 million tonnes for the SY2021 season, which is higher when compared to the normative sugar stock levels
  5. Without considering the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture in SY2020, the production is expected to be around 32 million tonnes, the report stated.
  6. Meanwhile, the report said that the exports were on the lower side during the lockdown period given the modest port operations owing to the logistics issues and labour shortage, but the pace picked up in May-June 2020. Icra expects exports of around 5-5.5 million tonnes for SY2020.
  7. The sugar prices moderated closer to MSP (minimum selling price) levels of Rs 31 per kg in March May during lockdown period and then picked up to Rs 32-32.5 per kg in June. The pick-up in consumption and pace of sugar exports is likely to support the sugar prices in the near term.

Sabyasachi Majumdar, ICRA Ltd | Energynext“The domestic sugar consumption was adversely impacted by the nationwide lockdown owing to COVID-19 pandemic due to loss of demand on account either closure or limited operations of several beverage/food manufacturing units during April-May 2020,” Icra Ratings Senior Vice President and Group Head Sabyasachi Majumdar said.

 He further added, “with the easing of lockdown rules, the consumption is back to pre-COVID levels in June-July 2020. While we expect a decline in the sugar consumption in SY2020, the same is likely to go back to 26 million tonnes levels in SY2021.” he added.

“In SY2020, the production was higher by around 0.5-0.6 million tonnes than anticipated because the cane which was generally used by the local gur and khandsari manufacturers, got diverted to sugar mills with the former’s operations prematurely shut due to the lockdown”, it said.

Assuming the government continues support for exports for SY2021, considering the surplus scenario in the domestic market, exports are likely to be similar to the SY2020 figures, it added.

However, given the sugar surplus scenario, any significant increase in the sugar prices is ruled out, the Icra report added.

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