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Wednesday, December 17, 2014

Sugar production surges 47% in sugar season 2014-15 till 15 December 2014

Current ex-mill prices at 3-year low and around Rs 500-700 per quintal below sugar producing cost 

Sugar production upto 15 December 2014, in the current 2014-15 sugar season (October-September) is 42.25 lakh tonnes. This is about 47% or 13.5 lakh tonnes more than the production in the last sugar season, upto the corresponding period, of 28.77 lakh tonnes. 

Two years back i.e. during 2012-13 sugar season, upto 15 December 2012, 49.06 lakh tonnes of sugar was produced Indian sugar industry on a whole had produced 251.4 lakh tonnes in 2012-13 season. 

As compared to 426 sugar mills, which were crushing sugarcane on 15 December last year, 442 sugar mills are crushing sugarcane on 15 December 2014. 15 days back on 30 November 2014, 344 sugar mills were crushing sugarcane. 

Sugar production in the last 15 days i.e. between 1 December 2014 to 15 December 2014 has been 23.28 lakh tonnes. During the last year for the same corresponding period, the sugar production was 17.37 lakh tonnes. The main reason is that this year higher number of sugar factories are already crushing sugarcane, which in turn, is because of early start of crushing this season. 

About 166 sugar mills are crushing sugarcane in Maharashtra and have produced 20.73 lakh tonnes upto 15 December 2014, which is slightly higher as compared to 12.96 lakh tonnes at the same time last season, when 150 sugar mills were operating in Maharashtra. 

During 2012-13 sugar season i.e. 2 years back, Maharashtra sugar mills had produced 18.8 lakh tonnes upto 15 December 2012. 

U.P. sugar mills have also produced more sugar as compared to last year. About 7.94 lakh tonnes of sugar has been produced by U.P. sugar mills in the current season upto 15 December 2014, as compared to 3 lakh tonnes in the corresponding period last year. As against 110 sugar mills which were operating on 15 December 2013, 114 sugar mills are operating as of now. Most of the sugar mills in U.P. had started their crushing operations slightly late last year i.e. in the first week of December. However, during this season the crushing operations in U.P. have started early and, therefore, the production is higher. Two years back, at the same time, in 2012-13 season, U.P. sugar mills had produced 10.33 lakh tonnes upto 15 December 2013. 

Sugar production in Kanataka is almost similar to that in last year upto 15 December. About 53 sugar mills are crushing sugarcane in Karnataka and have produced seven lakh tonnes upto 15 December 2014, which was 7.57 lakh tonnes in the corresponding period last year when 55 sugar mills were operating in the State. 

The other States have produced 6.58 lakh tonnes of sugar upto 15 December 2014, which was 5.24 lakh tonnes in the corresponding period last year. 

Ex-mill sugar prices have been continuously falling almost on a daily basis in the range of Rs 10-40 per quintal daily. The current ex-mill prices are at its lowest in the last 3 years and around Rs 500-700 per quintal below the cost of producing the sugar. Therefore, mills are facing huge challenges to even be able to pay the FRP of Rs 220 per quintal of sugarcane linked to 9.5% sugar recovery. 

It is, therefore, feared that if the ex-mill sugar prices remain at this level, cane price arrears of farmers may start getting accumulated. Since ex-mill sugar prices are lower than last year but the sugarcane prices are higher, the cane price arrears, which had crossed Rs 12,500 crore in March 2014, in the last sugar season, may be higher unless the sugar prices improve. 

The incentive for raw sugar production and exports thereof announced by the Government in February 2014, which was applicable for 2 sugar seasons i.e. September 2015, was required to be reviewed by the Government before the start of the current sugar season. 

Accordingly, the review should have been carried out in September 2014, but the same is awaited. Meanwhile, the global sugar prices have only fallen further (even below 15 cents/lb), making sugar exports from India unviable. The industry and experts are anxiously waiting for the announcement of continuation of the incentive scheme on raw sugar production and exports soon, so that mills could produce raw sugar for the purpose. 

The Government's decision to adopt a fixed pricing policy for ethanol procurement and to ensure annual excise permits for movement of ethanol should go a long way in improving supplies and procurement of ethanol for the mandatory 5% ethanol blending programme in the country. The sugarcane crushing is in its full swing, and, therefore, sugar mills would be very eager to finalize contracts for sale of rectified spirit, alcohol or ethanol, so that they have an adequate storage capacity for further molasses and alcohol during the season. Therefore, the industry anxiously awaits tenders or invitation of Expression of Interest by the OMCs for deciding supplies at oil depots. An early tender or invitation of Expression of Interest from OMCs would ensure adequate ethanol supply commitment for the ethanol blending programme.
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