With rising sugar prices and a good monsoon, the sugar sector is looking at better days ahead. BTVI spoke with Abinash Verma, Director General, Indian Sugar Mills Association (ISMA), on the outlook for the sector.

Excerpts:

How do things look going into the crushing season and the recent rise in prices?

You must contextualise the rise in price this year with the crash seen last year, which was the lowest in six years. Over that period, prices fell from ₹32-33/kg to ₹20/kg. This year, prices have gone up to ₹34/kg. If the cost of production is ₹33/kg, and we are getting ₹34.50/kg at the mill gate; I wouldn’t call it a big rise in prices.

It as an improvement from the rock bottom. The fundamentals clearly suggest that next year should be balanced in supply and demand. We should open the next season around 7.2 or 7.3 million tonnes of sugar. Next year, the production is seen lower than the current season. If you add a healthy opening balance, it will be about 4 million tonnes than the level of the domestic consumption next year. There will be enough surplus sugar next year.

What is the acreage position with this year’s monsoon? We learn that there has been some deficiency in Maharashtra and Karnataka, but surplus in Uttar Pradesh. How will this affect the yield?

Sugar cane is a 12-18 month crop. What will be harvested next October was sown in 2015, when there was a drought in Maharashtra and northern Karnataka. So the acreage in those two States has gone down. We have already estimated that the cane availability will be lower than what it was a year ago. We have dropped our production estimate for next season to 23.2 million tonnes, from 25.1 million tonnes for the current season. Add to that level of 23.2 million tonnes the opening balance of 7.3 million tonnes; it gives you a healthy level for the 2017-18 sugar season. The recent rainfall has been excellent, especially in western Maharashtra and northern Karnataka, which are the major contributors of sugar cane in the country. The sowing is back, farmers are more interested in sugar cane, and those who had left it are coming back. Sugar cane availability from the present sowing, for the 2017-18 sugar season, will be back to what was earlier. We expect surplus sugar production in the 2017-18 season from Maharashtra and Karnataka.

Uttar Pradesh has improved its cane variety, which is giving better yields and recovery. Next year, we expect the better variety to go up to 35-38 per cent from the current 18 per cent. Uttar Pradesh, too, has had normal monsoon; so we expect it to give higher production. Tamil Nadu had fallen from 25 lakh tonnes three years back to 12-13 lakh tonnes, that is seen recovering to 15 lakh tonnes of production this year. We saw floods there at the end of last year, so the reservoirs have good levels of water. Overall, there is a fall in the expected production for 2016-17, but with a good opening balance, there will be no shortage.

In UP, where elections are drawing closer, the State-Administered Price has been a big issue. The SAP has not been revised for the last three years. Are there chances of that being raised from ₹280/quintal as polls near?

It’s tough to put a point on what is a political move. I would not like to comment on that.

The biggest positive move I’m seeing is that the Samajwadi Party’s government in UP has realised that increasing the sugar cane price unreasonably on political grounds has helped neither the industry there nor the farmers.

The government has come forward to assist the industry and farmers by sharing a part of the SAP. The government has agreed that the previous price rises were unreasonable.

What is the current quantum on cane arrears and how much is owed to farmers in UP?

Arrears, right now, are at a much better point than what they had been at this stage of the season in the last 2-3 years. All-India, it is around ₹2,200 crore. UP will be around ₹1,000 crore based on the Centre’s FRP (Fair and Remunerative Price). If you add the State government’s SAP, it works out to ₹4,500 crore.

Last year would have been around ₹15,000 at this point in the cycle. The pay-out to farmers is much better now. By the start of the next season, this should be cleared.

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