Domestic sugar industry, reeling under an anticipated higher production, may need the government support to tide over the glut and drop in prices, said a release from rating agency ICRA on Wednesday.

“Based on current trends, domestic sugar production for sugar year 2017-18 is anticipated to increase by at least 33 per cent to around 27 million tonnes (mt) (as against its earlier estimate of 26 mt), although an even higher production cannot be ruled out at this stage. The consumption is expected to increase to around 25 mt in SY2018 from 24.5 mt in SY2017,” said Sabyasachi Majumdar of ICRA.

The glut in production is mainly due to a recovery in yield in Maharashtra, northern Karnataka and Uttar Pradesh. The increase in production — together with the liquidation of sugar stocks to meet cane payments — had resulted in a correction is sugar prices during December-February, when it plummeted to ₹31,500 per tonne before climbing back to ₹35,000, thanks to the government initiatives like doubling import duty to 100 per cent on imported sugar and capping sugar sales by mills.

Currently, the ex-mill sugar prices hover around ₹34,500-35,000 a tonne. But a renewed pressure on prices cannot be ruled out if the final production happens to higher than the current estimates, the ICRA statement said.

“Given the increase in production levels and fall in prices, govt support will be critical for the financial performance of the sugar industry in the near-term,” Majumdar said.

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