With sugar production falling, soaring prices may lead to imports
India’s sugar output is expected to fall to 260-265 lakh tonnes, pushing prices above ₹4,100/quintal. Exports of 10 lakh tonnes and declining stocks may lead to imports. Disease outbreaks and lower sugar recovery rates are key factors. Mills are reducing ethanol production, while the festive season may further strain supply. Government interventions remain critical.
After strong lobbying by the sugar industry, the central government allowed the export of 10 lakh tonnes of sugar in the current sugar season (2024-25). However, given the declining sugar production estimates, this decision can be questioned. Increasing exports and decline in production have pushed ex-factory sugar prices in the domestic market above ₹4,100 per quintal, while retail prices have reached ₹45 per kg. Consequently, sugar production and prices are now being continuously reviewed. If production declines further, sugar prices will rise. Additionally, by the end of the season, the closing stock may fall below 50 lakh tonnes, potentially necessitating sugar imports.
The primary reason for declining sugar production is reduced sugarcane yield due to disease outbreaks in Uttar Pradesh. Moreover, sugar recovery rates in Maharashtra, Uttar Pradesh, Karnataka, and other states have dropped by up to 10 percent. Due to the sugarcane shortage, about one-third (186) of the country’s sugar mills closed as early as February.
Industry sources say the latest sugar production estimates are concerning. The country’s sugar output is now expected to be around 260-265 lakh tonnes, which is 55-60 lakh tonnes less than last year’s production of 319 lakh tonnes. With domestic sugar consumption at approximately 285 lakh tonnes annually, production may fall short by about 25 lakh tonnes. At the end of the last season, the country had an closing sugar stock of about 80 lakh tonnes. However, with the current season’s export of 10 lakh tonnes and a decline in production, this stock may drop below 50 lakh tonnes.
Some industry experts fear that sugar stocks could fall to around 40 lakh tonnes by the end of this season. According to established standards, a stock equivalent to three months’ consumption—about 70 lakh tonnes—is required. In light of falling production, the government has released a lower sugar quota for the open market in March compared to last year.
Additionally, due to favorable sugar prices, most sugar mills have halted direct ethanol production from sugarcane juice. Many mills have also reduced ethanol production from B-heavy molasses, as the government has not increased ethanol prices for these two categories.
This year, Diwali falls in October, while the new sugar production season begins in November. This timing could disrupt the balance between sugar supply and consumption during the festive season. If prices surge excessively, sugar imports may become necessary, raising questions about the government’s decision to permit exports despite declining domestic production.
Sources suggest that sugar production estimates were exaggerated to secure export approvals, with both industry lobbying and political pressure playing a role. A political party president reportedly wrote to Food Minister Pralhad Joshi twice, advocating for the export of 20 lakh tonnes of sugar. While the industry pushed for the same, the government ultimately approved only 10 lakh tonnes.
Despite falling sugar production and rising prices, the Uttar Pradesh government has not increased the State Advised Price (SAP) for sugarcane this year. The decision to maintain last year’s SAP level was taken in February, when most of the crushing season had already passed.
On February 28, the ex-factory price (including GST) of M-grade sugar in Uttar Pradesh ranged from ₹3,960 to ₹4,130 per quintal. In Maharashtra, the ex-factory price of S-grade sugar was ₹3,770 to ₹3,830 per quintal, while in Karnataka, it was ₹3,800 to ₹3,830 per quintal. In Gujarat, M-grade sugar was priced at ₹3,920 to ₹3,950 per quintal, and in Tamil Nadu, S-grade sugar ranged from ₹3,980 to ₹4,050 per quintal. The retail price of sugar on that day reached ₹45.10 per kg. Meanwhile, the London (FOB) export price was $540 per tonne (approximately ₹4,365 per quintal). As production declines become clearer, further price increases are expected.
Amid concerns over falling production, the government has reduced the open market sugar quota for the current month. The current situation is not only challenging for the government but also increases the accountability of the sugar industry. If India is forced to import sugar due to low production and rising prices, it will be costly, as global sugar production this year is about 50 lakh tonnes short of demand.
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Source : Rural Voice
