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ICRA expects domestic sugar production to increase by 3.3 to 3.7% Y-O-Y

18 Dec 2014 Evaluate

Rating agency ICRA expects domestic sugar production to increase by 3.3 to 3.7% y-o-y to around 25 million tonnes during sugar year (SY) 2015 and the domestic sugar production is expected to outstrip domestic consumption for fifth year in a row.

ICRA noted that a decline in international sugar prices coupled with expectation of higher production  during SY15, had impacted domestic prices in August and September 2014. Liquidation of stocks by mills following court action in Uttar Pradesh also affected prices in September 2014. Despite export, a surplus scenario prevailing in the domestic market which coupled with arrival of fresh supply into the market is likely to put pressure on the realisations in the near future. Continuation of export subsidy remains critical to relieve pressure from domestic stocks and support domestic prices to an extent.

Moreover, profitability of mills in Uttar Pradesh and Tamil Nadu has been hit due to high cane costs and lowery recovery rates when compared to other regions across the country. Debt levels continue to remain on the higher side, although availment of interest-free excise duty loans (under the Scheme for extending financial assistance to sugar undertakings) by the sugar mills could ease pressures on coverage indicators and liquidity to an extent.

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