An anticipated production glut and steep decline in global prices may not have an impact on domestic sugar prices in the near term, a rating agency said on Monday.

Sugar prices in the country would remain firm in the near term despite the expected increase in output by 20-23 per cent to 24.5-25 million tonnes (mt) during Sugar Year 2018, which commenced this month, rating agency ICRA said in a statement.

However, as both domestic production and consumption are estimated to be almost at the same levels, the stock position is expected to be tight, resulting in low closing stock levels, it said, adding that this would help sugar prices remain range-bound at healthy levels.

The increase in sugar production is mainly driven by recovery in cane availability in the key sugar-producing States.

Good monsoon rains may push Maharashtra’s production up 70 per cent year-on-year to 7.2 mt and Karnataka’s output by nearly 24 per cent y-o-y to 2.6 mt. But mills in Tamil Nadu, which experienced poor rainfall during the previous North-East monsoon, may witness a 42 per cent decline in sugar production, said Sabyasachi Majumdar, Senior Vice-President and Group Head, ICRA.

Limited imports allowed by the government on two occasions in recent months didn’t impact sugar prices. They have remained range-bound between ₹36,000-₹37,500 per tonne since March, he said.

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