Isma cuts sugar output estimate

Photo: Shutterstock
The Indian Sugar Mills Association (Isma) has reduced its production assessment for the ongoing sugar season, 2016-17 (October to September), to 21.3 million tonnes, down nine% from the earlier 23.4 mt.

The fall is largely as “some mills have closed their operations in drought affected areas, mostly in Maharashtra and Karnataka, and field reports that sugarcane availability in these two states is lower than earlier expectations”, said Isma. 

The latest estimate is largely in line with estimates of the trade and of others, of 21-21.5 mt. As a result of the fall, Uttar Pradesh is set to be the top sugar producer, toppling Maharashtra. Isma has also cut the consumption estimate. Meanwhile, reports from sources close to the Union food ministry suggest the government might remove the cess on mills. This was 24p a kg till January 2016 and then raised to Rs 1.24 a kg to compensate for the export subsidy the government was giving. The cess was to be deposited in the Sugar Development fund. It appears the proposal is to do away with the fund and the cess would be subsumed in the coming goods and services tax. The industry, however, has a different view. 

T Sarita Reddy, president, Isma, said: “Doing away with the fund is not the right thing because many mills have taken a loan from it for development.” The money with the fund is of the sugar industry and it should be given back to the mills by way of interest rate subvention or some other form, she said.

Isma's downward revision follows analysis of satellite images of the area harvested for crushing up to January 10 and that yet to be harvested. Sugar production up to January 15 was 10.48 mt, around five% less than at this time last year.

According to sources in Isma, it also reduced the sugar year's consumption estimate from 25.5 mt earlier to 24.2 mt. The season began with opening stock of 7.7 mt but with revised production and consumption estimates, the closing stock has been revised downwards to an estimate of 4.85 mt at end-September 2017, from the earlier 5.5 mt. That, says Isma, is about two and a half months of consumption.

Isma field reports indicate cane sowing from Maharashtra and Karnataka is significantly higher as compared to the same period last year. Which means cane output in Maharashtra and Karnataka in the next season should be back to normal and mills would start early, from end-October 2017. Hence, “old sugar equivalent to 45-60 days is more than sufficient to cover the period before the new season’s sugar comes into the market”, stated Isma. 

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel