The country’s sugar production is likely to increase five per cent to 250-255 lakh tonnes (lt) next season starting October despite a one per cent drop in sugarcane acreage, according to Indian Sugar Mills Association (ISMA).

A statement released by the ISMA on Wednesday said that another surplus production is likely for the fifth consecutive year. This season, production was 243 lt against 230-240 lt domestic demand.

“On the basis of September 2014 satellite images, ISMA estimates the total cane acreage at 5.29 million hectares, which is just about one per cent less compared with last year,” said the statement.

Production is estimated to rise by 20 per cent and 7 per cent, respectively, in Maharashtra and Karnataka, the two key cane-producing States. However, ISMA estimates that Uttar Pradesh, the State owing a bulk of Rs 7,760 crore cane arrears to farmers, will see its production fall to 6 lt from 6.5 lt.

Sugarcane acreage in Tamil Nadu has particularly been impacted by poor rainfall and is some 12-13 per cent lower, as a result of which sugar output is expected to decline by nearly 20 per cent, ISMA said.

Export incentives

With an estimated 72-75 lt of opening stock likely on October 1, which is 25 lt more than domestic requirement, ISMA wants the Government continue the export subsidy to help inject some liquidity into the cash-starved industry. Surplus stocks could hurt depressed prices even further and increase worries for debt-ridden mills around the country, it said.

The Government is currently providing export subsidy of Rs 3,371/quintal of sugar.

“As already decided in February 2014 by the Government, it is important to continue with the export incentive scheme for raw sugar in the 2014-15 sugar season,” said ISMA.

The sugar industry reiterated that to deal with surplus sugar, it would convert cane juice into ethanol to be blended with petrol according to the mandatory 5 per cent requirement.

“One billion litres of additional ethanol procurement can reduce about 1.7 million tonnes of surplus sugar from the market.

This can help the industry with better cash flows and they can pay cane price to the farmers on time in the next sugar season,” said ISMA.

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