Domestic sugar output in the 2019-20 marketing cycle is projected to dip by more than 14% to 28.2 million tonnes (MT) from 32.95 MT in the current crushing season.

Industry body Indian Sugar Mills Association (ISMA), in its preliminary estimates based on satellite images, has attributed deficit production to poor rainfall and low water availability in major cane growing states of Maharashtra, Karnataka and Tamil Nadu.

However, sugar opening stock in October 2019 is expected at record high of 14.5 MT, almost thrice the ‘normative requirement’ of 5 MT in carryover stock. Since, annual sugar requirement is around 2.65 MT, there would still be surplus stock in next season with ISMA stressing for allowing sugar exports to insulate sugar companies from prospective losses arising out of inventory costs.

“The silver lining is that global sugar market is likely to have a deficit of 4 MT, which would provide an opportunity to Indian companies. However, the Centre should announce sugar export policy early, so that millers get ample time to capitalise on the favourable matrix,” ISMA director general Abinash Verma had earlier told Business Standard.

ISMA has pegged sugarcane acreage in India at 4.93 million hectares (MH) in 2019-20, roughly 11% lower compared to 5.50 MH last year.

Top sugar producer, Uttar Pradesh is estimated to have cane area at 2.36 MH, 2% lower than 2.41 MH in 2018-19. However, the state is projected to record better yield per hectare due to high yielding varieties. The state sugar production next season is projected to be 12 MT compared to 11.8.2 MT in 2018-19.

However, poor rainfall has hit second ranked Maharashtra’s cane area by 30% to 8,23,000 hectares compared to 1.15 MH last year. As such, sugar production is expected to nosedive to 7 MT compared to 10.72 in 2018-19 season.

Drought like conditions have also hit Karnataka, where cane area and sugar production are pegged at 420,000 hectares and 3.5 MT, down from 502,000 hectares and 4.36 MT respectively.

Tamil Nadu also faced deficient rainfall last year. The sugarcane area decreased to about 230,000 hectares, while sugar production is expected to dip from 860,000 tonnes in 2018-19 to 750,000 tonnes respectively. The remaining states are expected to collectively produce 5 MT next season.

After rainfall in July-Sep 2019, water situation in reservoirs and second set of satellite images in Sep-Oct, ISMA will review the analysis and release its 1st advance estimates, since the crop will be more mature and there will be more clarity on rainfall and water availability, the Association said in press communiqué.

During 2018-19, 295 million litres of ethanol made from B heavy molasses/sugarcane juice had so far been supplied to oil marketing companies (OMC), which is equivalent to sugar diversion of 300,000 tonnes. This gave a breather to mills, which are currently saddles with arrears of nearly Rs 20,000 crore, of which UP alone comprises the largest chunk of Rs 10,000 crore.

Since, OMCs announce their ethanol requirement in August, sugar industry has urged the Centre to come out with ethanol policy around the same time.

Over the past seasons, sugar companies have been weathering a market glut, falling prices, arrears and tepid exports. In the run up to the 2019 Lok Sabha polls, the Centre had last year announced a slew of incentives to support the sector, including soft loan and export quota.