SOUTH INDIA STARES AT A SUGAR DEFICIT BY SEPTEMBER-END

Sugar mills in south India are likely to face a shortage of sugarcane by the end of the current crushing season in September because of a decline in yield after three years of drought.

The Indian Sugar Mills’ Association (Isma) early this month estimated a 40-50 per cent decline in yield from sugar- cane this year due to lower acreage and unfavourable climate.

India’s second largest sugar pro- ducing state, Maharashtra, faced a drought in 2016 that lowered cane yield. The Isma forecast a 50 per cent decline in sugar output in Maharashtra this season to 4.2 million tonnes from 8.42 million tonnes last year.

The carryover stock of 7.75 million tonnes for the 2016-17 season was largely with mills in Maharashtra, Karnataka and Tamil Nadu. However, sugar mills in Maharashtra and the southern states have little carryover stock for 2017-18, most of which is likely to remain with sugar mills in Uttar Pradesh.

“Sugar will be in abundance in the north. There might be some concerns over availability in Tamil Nadu, Andhra Pradesh and Telangana,” said an industry executive.

The output of sugar is expected to decline by around 50 per cent in Tamil Nadu, Karnataka and Andhra Pradesh, which reported production of 6.25 million tonnes in the 2015-16 crushing season.

Data compiled by the Isma showed India’s sugar output at 20.3 million tonnes. Traders and individual mills, however, estimate output at 19.5 million tonnes this year and consumption at 24.5 million tonnes. The ISMA estimates sales of 23.8-24 million tonnes in the current year against 24.8 million tonnes last year.

“There will not be any shortage of sugar in Tamil Nadu because consumers in West Bengal, Bihar and the Northeast do not enjoy a price advantage now. Should southern states face any shortage of sugar, we prefer supplies from Uttar Pradesh. We urge the government to offer a transport subsidy,” said Paria Samy, president, South India Sugar Manufacturers Association (Sisma).

Samy added the current price of sugar was a little above its cost of production and the government should not worry if these rose by ~1-2 per kg.

Rating agency ICRA has estimated sugar consumption will decline 3-3.5 per cent this year due to lower offtake from the public distribution system, consumption loss post demonetisation as well as slow demand from bulk consumers.

“The slowdown in demand is likely to have an impact on prices and business volumes of sugar companies,” said Sabyasachi Majumdar, senior vice-president and group head, ICRA Ratings.

The Isma forecast a 50 per cent decline in sugar output in Maharashtra this season to 4.2 million tonnes from 8.42 million tonnes last year