After the government allowed duty-free imports of 5 lakh tonne of raw sugar, credit rating agency Crisil Ratings in its latest report has said that sugar prices are expected to remain firm in sugar season 2017 (SS2017), despite government allowing import of 0.5 MT of raw sugar at zero duty through open general licence and fall in production in Maharashtra and Karnataka.
Local sugar prices have risen 8 percent from a year ago, in expectations of a drop in production. Though, Crisil ratings reasoned that as the government has waited till the end of the crushing season to allow imports into the country, imports will remain range-bound and would be towards targeting physical shortages.
Crisil pointed out that the credit risk profiles of sugar manufacturers are likely to improve over the medium term with sugar prices expected to remain firm over the current and next sugar seasons (October 1 to September 30). The resultant higher profit and cash accrual is expected to be used by manufacturers to either reduce debt or invest in the relatively more stable ancillary business of distillery and electricity co-generation
Crisil said that it expect sugar prices to remain firm in SS2018 as well, even if production increases to 25 MT - or 4-5 MT more than SS2017 - due to better cane availability in Maharashtra and Karnataka. India’s sugar output in the 2016/17 season that began on Oct. 1 is likely to fall to 20.3 million tonnes, down from 25.1 million tonnes a year earlier.