Unseasonal rainfall in Uttar Pradesh, combined with a higher diversion to ethanol production, is expected to reduce sugar production this year, as per industry sources. As the average sugar prices in retail market rising in demand, a reduction in surplus sugar could help mills speed up cane payments and reduce their pending arrears to cane growers this season.
Late payments and arrears have recently become a political flashpoint, particularly in the poll-bound states of Uttar Pradesh and Punjab. Arrears to farmers stood at ₹2,417 crores at the end of July, as of the most recent data.
Increased creage unlikely Increased output
In comparison to last year, retail sugar prices have risen by 5%. According to Consumer Affairs Department monitoring, retail prices in Delhi alone have risen by more than 13% in the last three months.
Based on satellite images taken in the second week of October, the Indian Sugar Mills Association (ISMA) estimated that 54.37 lakh hectares of sugarcane were planted this year, which is about 3% more than the previous season. However, increased acreage is unlikely to result in increased output.
Because of untimely heavy rainfall in the Upper Peninsula, especially in the eastern part of the state, both yield and recovery are expected to drop this year. The initial estimates put the production at 113.5 lakh tonnes.
State with the highest sugar production
Maharashtra is expected to overtake Uttar Pradesh as the state with the highest sugar production this year, thanks to adequate monsoon rainfall and reservoir water availability. Although ratoon cane availability is greater than newly plant cane, yield per hectare is expected to be slightly lower than previous year, as per the ISMA, production will be around 122.5 lakh tonnes.
Both sugarcane acreage and yield in Karnataka are higher than last year, where 49.5 lakh tonnes are expected to be produced. The remaining states are expected to produce 53.1 lakh tonnes in total.
Because the 339 lakh tonnes to be produced is significantly higher than last year’s domestic sales of around 266 lakh tonnes, the sugar mills are heavily reliant on exports and ethanol production to reduce the surplus.
ISMA estimates that diverting sugarcane juice and B-molasses (“second” molasses) for ethanol will reduce sugar production by 34 lakh tonnes, 13 tonnes more than last year, with at least 60 lakh tonnes of exports expected.