Sugar Industry: Stage set for a sweet comeback

Mumbai: After the downtrend in the last two years, the sugar industry is poised to reap a rich harvest in the season beginning October 2010. According to the latest Government estimates, sugar production in the country is expected to touch 22-23 million tonnes (mt) in 2010-11against 19 million tonnes last year. Production fell sharply to 16 mt in 2008-09.

The industry has pegged sugar production much higher at 26 mt on the back of high sugar prices and the farmers' willingness to take up cane cultivation. The global sugar surplus is estimated at 2.5 mt in the forthcoming 2010-11 season as against a deficit of about 8.51 mt in 2009-10, according to the International Sugar Organisation.

India, Brazil factor

The expectations of surplus global sugar supply were largely due to bumper production in India and Brazil.

Sugarcane output in Maharashtra is estimated to touch 85 mt in 2010-11, with 10 lakh hectares in the State under cane cultivation. The State Government has estimated that there will be 10 mt of excess cane available even if the crushing season were extended up to June 2011. The State, the largest sugar producer in the country, has a daily crushing capacity of 6.40 lakh tonnes. In the sugar season 2009-10, about 126 cooperative and private sugar mills were operational in Maharashtra. About 67 sugar mills were shut last year due to financial difficulties and a shortage of cane availability. With a bumper crop in the offing, the State Government has drawn up plans to revive 20-22 mills in the current season. Maharashtra crushed 66.5 mt of cane to produce 709 lakh quintals of sugar at 11.54 per cent recovery last year. Cane production last year was 30 per cent higher than the earlier estimates for 425 lakh tonnes and cane on 350 hectares still remains to be crushed. Despite the onset of the monsoon, three mills are still crushing cane.

The Brazilian Sugarcane Industry Association (Unica) has projected sugarcane production in the 2010-11 harvest season would increase 10 per cent to 595.89 mt against 541.50 mt last year.

Sugar production in the new harvest in Brazil is expected at 34.09 mt, a 19 per cent increase over 28.63 mt produced in 2009-10. The Government decision to raise the levy sugar price by Rs 4 a kg to Rs 17.84 a kg may prevent a steep fall in sugar prices in the coming days. Levy sugar is an obligation on mills to sell a certain percentage (10 per cent for sugar season 2009 and 20 per cent for 2010) of their total output to the Centre for sale through the public distribution system. Levy sugar prices have remained unchanged at Rs 13.84 a kg since 2003-04 despite the cost of production shooting through the roof.

Sugar manufacturers, including Balrampur Chini, Bajaj Hindustan and Shree Renuka Sugars, have been pursuing the Government to increase levy prices in line with the fair remunerative price (FRP) for sugar cane introduced by the Government.

In FY10, the Centre fixed the FRP for cane that mills buy from farmers at Rs 129.76 a quintal, up from a statutory minimum price of Rs 81.18 a quintal paid last year. The increase in provisional sugar prices is positive for the industry, which has been in a downslide lately due to a 40-45 per cent fall in domestic and global sugar prices, said an analyst.

By- Suresh P. Iyengar
Hindu Business Line

June 18, 2010