The domestic sugar production is likely to go up by 12 per cent to 30.5 million tonnes during the sugar year 2021, beginning October, due to availability of sugarcane in Maharashtra and Karnataka, according to an ICRA report. This forecast is after adjusting for the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture.
The production is likely to increase in SY2021, because of higher production in Maharashtra and Karnataka, which was adversely impacted in the previous year due to drought. In addition, heavy rainfall and waterlogging during the last year (August- September 2019) adversely impacted the sugarcane crop in a few regions of Maharashtra and North Karnataka for SY2020, the report said.
ICRA expects the closing stocks for SY2020 at around 11.0 – 11.5 million tonnes after considering the consumption of 25 million tonnes (decline of 3.8 per cent year-on-year) and exports of 5-5.5 million tonnes. This along with higher sugar production for SY2021 is likely to result in domestic sugar availability of around 42 million tonnes. In the light of the continuing sugar surplus scenario in the domestic market, continued government support would be critical for industry’s profitability, it added.
This increase in production is majorly driven by the increase in cane availability in Maharashtra and Karnataka in SY2021. The domestic sugar consumption was adversely impacted by the nationwide lockdown owing to COVID-19 pandemic due to loss of demand on account either closure or limited operations of several beverage/food manufacturing units during April-May 2020.
Without considering the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture in SY2020, the production is expected to be around 32 million tonnes, the report stated.
In Maharashtra, production is expected to increase by 64 per cent year-on-year at 10.1 million tonnes and in Karnataka, by 26 per cent Y-o-Y to around 4.3 million tonnes in SY2021. In UP, production is likely to decline by 3 per cent Y-o-Y to 12.3 million tonnes, the report added. The pick-up in consumption and pace of sugar exports is likely to support the sugar prices in the near term. However, given the sugar surplus scenario, any significant increase in the sugar prices is ruled out, the ICRA report added.