The profit of sugar companies is expected to improve with prices firming up on the back of lower sugar production. Domestic production for the sugar season that started in October was revised downwards by 7.8 per cent to 26 million tonnes (mt) from the earlier estimate of 28.2 mt.

This apart, exports are pegged at 3.5 mt which is likely to improve demand and support the sugar prices in the near term.

Sabyasachi Majumdar, Senior Vice-President, ICRA Ratings, said closing sugar stocks have been revised to 1010.5 mt against 12.5 mt post downward revision of the sugar production estimate.

The domestic demand-supply situation would relatively be better, supporting the sugar prices to hover at the current level of ₹33-34 a kg. Moreover, farmers’ remunerative price fixed by the government for sugarcane procurement has been retained at last year level of ₹275 a quintal. Retaining the

FRP at last year’s level will be a saving grace for the sugar industry in the face of the supplyinduced pressure, he said.

Output down

Sugarcane production is likely to be lower by 21 per cent in this season compared to 32.9 mt logged in last season. The cane availability in Maharashtra and Karnataka, the two major growing States, was adversely impacted last year due to drought, while this year heavy rainfall and water logging will hit the output in these two States.

In Maharashtra and Karnataka, the production is likely to decline by 42 per cent and 28 per cent to 6.2 mt and 3.2 mt, respectively. The production in Uttar Pradesh will be at last year’s higher level of 12 mt.

ICRA expects sugar consumption to increase to 26.7 mt this season outstripping production by about 0.7 mt.