Sugar Production May Rise By 10% in 2011-12.

Sugar output of India, the world's second largest producer after Brazil, could rise by about 10% to 26.5 million tonnes in 2011-12 sugar year starting October on higher cane area, industry body ISMA said on Tuesday.

Indian Sugar Mills Association (ISMA) has pegged the production at 24.2 million tonnes in the current sugar year as against 19 million tonnes in the 2009-10 (October-September). The annual domestic demand stands at 22-22.5 million tonnes.

ISMA demanded that the government should allow further export of 1.5 million tonnes of sugar under Open General Licence (OGL). In April, the government had allowed 5,00,000 tonnes sugar exports under OGL. "We expect sugarcane area to go up by 5%. The area is about five million hectare currently. Production is expected to be about 26-26.5 million tonnes in the next sugar season," ISMA President Narendra Murkumbi told reporters here.

"Next year we are expecting a surplus crop and currently we have enough stock. So, this is the right time to export sugar and reduce the sugar stocks held with the mills," said Murkumbi, who also heads Shree Renuka Sugars.

He pointed out that the sugar prices have been slowly but continuously falling due to delays in exports and restrictions on domestic demand because of stock-holding limit on traders. "The mills are so overburdened with surplus inventories that most of them do not have adequate storage capacities and cash flows, which has led them to resort to distress sale of sugar, which is only bringing down the prices," he said.

"The seriousness of the problem may be judged by the fact that value of stock balance with sugar mills at present would be Rs 35,000 crore," he added.

ISMA noted that if the government does not take any steps to export some of the surplus sugar, the opening balance for 2011-12 season might be over 6.5 million tonnes. The opening stock for 2010-11 season stood at about five million tonnes. With falling domestic prices and improving international sugar prices, the mills stand to gain about Rs 500 per quintal of sugar exports if the same is allowed immediately.

The current ex-factory prices are lower by over Rs 300 per quintal than the cost of production, he said, adding that such a situation will lead to cane price arrears to farmers. The cost of production is around Rs 2,900/quintal in Uttar Pradesh and Rs 2,700/quintal in Maharashtra. ISMA also demanded that the duty-free regime on sugar import should end as "this is hurting market sentiments and sending wrong signals to the market about clarity of government policies and intentions".

Source : moneycontrol.com