Sugar production to decline 19% in 2016-17

For the first time, it is official that India’s sugar production will decline 19 per cent to 20.3 million tonnes in the 2016-17 season.

Food minister Ram Vilas Paswan said: “This year we will produce about 20.3 million tonnes of sugar.”

The country had produced 25.1 million tonnes in the 2015-16 season (October-September). The minister, however, said that there is adequate stock to deal with the shortage due to carry forward stocks from last year. He also said that the consumption will be 24 million tonnes to 24.5 million tonnes, which is in fact lower than last year’s 25 million tonnes.

When asked why the government had extended the validity of stock holding limit, Paswan said it has been done as a precautionary measure to prevent shortages due to hoarding.

The minister also said that the government has allowed import of 500,000 tonnes sugar at zero duty.

The cabinet last month extended the stock holding limit on sugar traders by another six months until October 28, 2017 to check prices within current Rs 42-44 per kg.

The stock limit of 500 tonnes and turnover limit of 30 days for sugar traders in the country other than those in West Bengal, was first imposed in April 2016. The limit in West Bengal is 1,000 tonnes.

This central decision enables state governments to continue with the stock limits and licensing requirements in respect of sugar.

The government anticipates hoarding and consequent profiteering due to drop in sugar production over the previous year.

Fixing of appropriate stock limit on need basis was essential to regulate supply of sugar and address speculative prices, officials had earlier said.

Paswan said the opening stock of sugar as on October 1, 2016 was 7.7 million tonnes. This year, the total availability would be 28 million tonnes, which is enough to take care of the demand, he claimed.

The minister, however, said that the October production is projected at 200,000 tonnes and in November, it may reach 2 million tonnes. But, from December onwards, the production will improve to 4-5 million tonnes per month during the crushing season.

“So sugar could be under pressure only in October and November. But we have adequate stock to deal with shortage in these months,” Paswan said.

Domestic sugar prices are likely to remain firm in the near term, given the tight stock position in the domestic and global markets, according to a report by rating agency ICRA.

The duty-free import of 0.5 million tonnes of raw sugar are unlikely to impact local prices adversely over the next couple of quarters, it said on April 26.

However, pressures on stock position and sugar prices cannot be ruled out next year if further import of duty-free sugar is permitted.

According to Sabyasachi Majumdar, senior vice president, ICRA, after the announcement of duty-free imports, there has not been a significant decline in sugar prices.

prabhudatta.m@mydigitalfc.com