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Sugar production set to hit a record high next season

Cane farmers may face about ₹25,000 crore in payment arrears from sugar mills by next May, according to industry estimates. With an 8% increase in acreage under sugarcane and adequate rainfall expected to lead to a bumper crop, the resultant production glut could hit farmers hard in an election year.

Satellite images from the latter part of June show that the total acreage under sugarcane in the country is estimated to be around 54.35 lakh hectares this kharif season, an 8% increase from the previous year, according to a statement by the Indian Sugar Mills Association.

High yield

With farmers switching more of their acreage to a cane variety with a higher sugar yield, ISMA expects mills to produce a record 350-355 lakh tonnes of sugar next year, even higher than the 322 lakh tonnes produced this year.

“Next year, the conditions are likely to be tougher than ever before…We expect to produce at least 90 lakh tonnes more than needed for domestic consumption,” ISMA general secretary Abinash Verma told The Hindu. “And we will start the next marketing season [in October 2018] with at least 100 lakh tonnes carried over from this year’s record harvests.”

In May 2018, mills’ pending dues to farmers had crossed ₹22,000 crore, according to the Food Ministry. Soon after the ruling BJP lost a key by-poll in Kairana in the heart of Uttar Pradesh sugarcane country, a slew of relief measures including a sugar production subsidy were announced.

By the end of June, the arrears had dropped to ₹18,000 crore and is likely to drop further, partly spurred by the Centre’s sugar relief package. However, as farmers start harvesting and selling this year’s kharif cane crop from October, and mills struggle with their bloated inventory, those dues are likely to rise again to at least ₹25,000 crore by the summer of 2019, according to industry sources.

One way to reduce that inventory and increase cash flow to mills, and ultimately to farmers, is to increase exports.

“We will aim to export 60 lakh tonnes next year — a huge challenge — and we will still be left with 130 lakh tonnes,” said Mr. Verma.

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