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Tamil Nadu will continue to under perform in sugar output as planting acreages remain stagnant across major cane growing districts.
This means the coming 2018-19 sugar season (October-September) will continue to be lacklustre though there could be a small improvement in output. It also means that the sugarcane pricing support from the government, while a welcome move, will be of little consolation.
In the current season, the State is expected to hit a historic low in sugar output — likely to be close to 6.5 lakh tonnes including about one lakh tonnes of processed raw sugar. According to the available figures as of March, mills have produced over 4.5 lakh tonnes (lt) as compared with about 6.5 lt during the same period last year.
For the coming season, output could improve a little to about 10 lt, but that would still be about one-third of the installed capacity, according to industry figures.
A senior executive pointed out that the North-East monsoon last year had been deficient across most of the growing areas in interior Tamil Nadu. Rains had largely been restricted to the coastal belts which have contributed to the improvement expected in the coming season.
Meanwhile, on the stock exchanges, stocks of sugar majors demonstrated small gains on reports of a possible government support on sugarcane payments to farmers. Industry representatives say this could be around ₹55 a tonne of sugar cane, working out to about ₹550 a tonne of sugar. But with international sugar prices hitting a low at about ₹22,750 a tonne (FOB), and an additional ₹1,600 for transport, the gap is huge with domestic prices at about ₹28,000.
The support is inadequate for any sugar mill. For Tamil Nadu mills, the situation is exacerbated as they face bigger losses. The output in the current season is just about 20-25 per cent of the installed production capacity. This means the cost of conversion and overheads is doubled to about ₹1,000 a quintal of sugar as compared with mills elsewhere with a surplus cane.
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