The sugarcane yield for sugar year 2017-18 is higher on account of good rainfall levels compared to sugar year 2016-17, which witnessed drought in various states.
Source: IIFL Research, ISMA
Increase in sugar output has adversely impacted the prices of sugar, as domestic sugar prices declined significantly in India. The estimated output as per ISMA for sugar year 2017-18 stands at 29.5mn tonnes, whereas the domestic consumption of sugar is expected to be around 25mn tonnes.
Sugar prices continue the downward trend
Source: NCDEX
Dues payable to farmers continue to increase owing to rising FRP price of sugarcane
Sugar mills owed an amount of ~Rs14,000cr to the sugarcane farmers as on January 31, 2018, as per the media reports. The state governments have issued notices to all the defaulting sugar mills for clearing the balance cane price dues. State governments of UP, Karnataka and Madhya Pradesh have reported to have issued recovery certificates to defaulting sugar mills for clearing the dues to the farmers.
Partially regulated sugar business has led to shrinking margins for sugar companies
Sugar sales and prices are driven by the market forces. However, as the sugarcane prices are controlled by the government, the margins of the sugar mills have declined in the midst of falling sugar prices.
The impact has been sharper on states following SAP, where cane costs are not linked to recovery. Further, the decline in prices of molasses, a key by-product, has affected the operating margins of standalone sugar mills.
Source: IIFL Research *As on March 7, 2018 What is the government doing to support sugar industry?
Policy direction to decide the track of sugar industry
Annexure: The making of sugar