The low closing stock levels of sugar in the Indian markets are likely to support the sweet commodity's prices in the near term, rating agency ICRA said on Monday.
"Domestic sugar production is expected to increase by around 20-23 per cent to around 24.5-25 million tonnes (MT) during sugar year (SY)2018, from 20.30 MT during SY2017," the domestic rating agency said in a release.
"Despite the increase in sugar production, the same would at best be at the same level as per ICRA's'estimate of consumption of around 24.5-25 MT in SY2018, resulting in a tight stock position.
"Thus, the low closing stock levels of sugar in the domestic market are likely to support the sugar prices in the near term," it added.
Noting that domestic prices have remained firm since March, with neither imposing nor withdrawal of import duty not making much difference to rates, ICRA noted the government had allowed raw sugar imports of 0.30 million MT at concessional duty last month.
"However, this move did not have any significant negative impact on domestic sugar prices, which are healthy at around Rs 37,000-37,500 per million tonne," the ICRA report said.
"On the other hand, globally sugar prices have been facing significant pressure since November 2016 after peaking at $595/MT in Oct 2016 (four-year high). This was mainly owing to lower sugar import demand from India and China," it added.
"The movement in domestic prices is expected to remain insulated from international prices owing to the government's cautious approach towards imports and exports," said ICRA Group Head Sabyasachi Majumdar.
Meanwhile, the Reserve Bank of India (RBI) has said the Indian sugar industry was seeing profits improve after a gap of several years, with impressive realisations in the past one year, resulting in a 20 per cent reduction its debt burden.
This substantial drop in debt burden has helped the industry post its highest-ever profitability in recent past, according to the latest RBI data.
--IANS
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