Higher MSP, rising international demand lure farmers to increase cane acreage

Lured by higher Minimum Support Prices (MSP) and rising international demand, farmers are expected to increase their acreage under sugarcane by 1% this year. India's sugar cane planting for 2012-13 season has gone up to 48.61 lakh hectares compared to 47.61 lakh hectares last year. This is for the fourth consecutive year in a row, the acreage under sugar cane has gone up.

The increase is despite the fact that cane arrears or payment to be made by factories to farmers is estimated at over Rs 10,000 crore for the 2011-12 sugar season that comes to an end in September. According to government data, Uttar Pradesh has been ranked first in acreage (23.60 lakh hactare) followed by Tamil Nadu, Andhra Pradesh and Bihar. However a marginal dip will be seen in the states of Maharastra and Karnataka.

Based on the current sowing pattern, the International Sugar Organisation (ISO) has pegged India's 2012-13 output at 24.5 million tonne (mt), down 5% over the previous year. However, the National Federation of Co-Operative Sugar Factories estimates the 2012-13 output at 25 mt. The Indian Sugar Mills Association is yet to come up with its projections for 2012-13.

India is expected to produce around 26 mt of sugar for 2011-12 and consumption is estimated at 22 mt. The Government recently freed up sugar exports by lifting the quantitative restrictions, a move that industry believes will help liquidate rising stocks and reduce cane arrears.