New Delhi, Sep 5 (KNN) Falling of ex-mill sugar prices below production costs, mounting  losses  for  sugar mills and accumulating cane price arrears leading to compulsive shut-downs from this stage, the Indian Sugar  Industry (ISI) is now exhibiting signs of complete turnaround with surging sugar prices and depletion in buffer sugar stocks due to decrease in global as well as domestic production and steady growth in sugar consumption, said a report.

Rating agency Care said  that for past two sugar seasons (SS; refers to the period October 1 to September 30) ended SS2015-16, the ISI has  been  witnessing  a  challenging phase  marked  by  extreme  volatility  in  sugar  prices  and  lopsided margins for the sugar mill owners.

This is because the  lower  area  under  cultivation  for  sugarcane  during SS2016-17 (from  approximately  5.3 million  hectares  in  SS2015-16  to  about  5 million  hectares  in  SS2016-17),  lower  opening  stock  of  SS16-17  (about  7.2  MMT)  and  a  steady  rise  in  consumption  would  further deplete  the  closing-stock  of  sugar.

Hence, the sugar price is expected to remain stable providing reasonably good margins to mill owners. On the other hand, government has introduced measures such as imposition of stock holding limits at the traders’ end, imposition of export duty of 20%and withdrawal of excise duty exemption on ethanol supplied for blending in order to keep sugar availability in domestic market intact.

The  sugar  price  started  picking  up  from  September  2015  and  since then  it  has  been on  a  continuous  uptrend.  In August 2016, sugar price prevailed at Rs.37.86/kg in wholesale market and crossed the price level of Rs.40/kg in the retail market.

The global consumption of sugar has shown rising trend on consistent basis.  On  the  other  hand,  the global   sugar   production   declined   by   7%   from 177.22  million  metric  tonnes  (MMT)  in  SS14-15  to 164.92  MMT  in  SS15-16  causing  a  global  sugar deficit  in  SS15-16  after  5  consecutive  SS of  surplus from SS10-11 to SS14-15.

The  sugar  production  declined  by  12.13  MMT  in SS15-16  of  which  98%  of  the  aforesaid  decline  is contributed by top 5 sugar-producing countries/regions,  namely,  Brazil,  India,  European Union, Thailand and China.

The country's sugar production is estimated at about 25.20 MT in SS2015-16, a 10.95 per cent drop from 28.30 MT in SS2014-15. At the same time, sugar export is expected to remain about 2 MT higher than imports in SS2015-16.

In September 2015, government announced Minimum Indicative Export Quotas (MIEQ) for mills and co-operatives for mandatory exports of 4 MT of sugar in 2015-16.

On the other hand, as a measure to curb imports, government enhanced import duty on sugar from 25 to 40 per cent from April 30, 2015.

As a result, the country's export increased by 12.40 per cent from 2.58 MT in FY15 to 2.90 MT in FY16, while import during the same period increased marginally by 0.10 MT to 1.10 MT, Care said. (KNN Bureau)