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Sugar industry sees extended party time Almost 50 pc rise in production likely

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M.R. Subramani

Chennai, Oct. 20

LOOKS like the party for the sugar sector will continue this season and may extend in to the first half of the next season too. An almost 50 per cent rise in sugar production, firm global and domestic prices and better capacity utilisation of the mills are factors that could contribute to the continued good run.

For the current season (October 2005-September 2006), sugar production could top 180 lakh tonnes (lt). This is against the estimated production of 127-130 lt last season. Initially, sugar production for this season was seen at 170 lt but good rains and a pest-free environment are indicating better things.

According to Mr Prakash Naiknavare, Managing Director, Maharashtra State Cooperative Sugar Factories Federation, production in Maharashtra alone could double to 46 lt from 22.3 lt last season.

"The production may even touch 185 lt. The gains are coming from almost across the country. There are also no reports of any pest attack on the crop," said Mr M. Manickam, Managing Director, Sakthi Sugars.

Tamil Nadu, Gujarat, Andhra Pradesh, Karnataka and Uttar Pradesh could witness a rise in production.

According to the Ministry of Agriculture, sugarcane has been sown in 41.37 lakh hectares, up 3.87 lakh hectares over last year.

"Sugarcane crushing in Maharashtra has begun. About 130 mills, including 19 private units, are in operation in the State. Crushing is likely to continue for 150 days. Last season, crushing took place for only 84 days and 100 mills were in operation," said Mr Naiknavare.

With a carryover stock of 40 lakh tonnes, import of raw sugar would not be required, he said. According to Mr Naiknavare, exports could be about five lakh tonnes. "The exports would be primarily the obligations that importers will have to fulfil for importing raw sugar during the last one and half years," he said.

Mr Manickam said there were some enquiries for exports but they would take place only after December. "There are no stocks now," he said.

However, mills would find it more beneficial to sell in the domestic market rather than export it.

Currently, export price for white sugar is ruling at $340-350 a tonne f.o.b (Rs 15,375-15,825). In the domestic market, medium sugar is ruling at Rs 18,740-19,270 a tonne, while small sugar is quoting at Rs 18,110-18,410.

"With a $37-40 difference between domestic and global prices, mills would prefer to sell here," Mr Naiknavare said.

While the consumer might have to pay Rs 20 a kg for sugar at the retail end, mills could fetch a "decent" return of Rs 16 at current levels, he said.

"We expect the prices to rule firm for the next one and a half years and the mills to reap the benefits," Mr Naiknavare said.

On the flip side, the release mechanism could affect the industry to some extent, he said. "But overall, the Centre's policy is helpful for the sugar industry."

(This article was published in the Business Line print edition dated October 21, 2005)
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