After the recent heavy rains in the southern and western parts of Maharashtra, the sugar crop may be damaged ahead of harvests. Maharashtra is India’s largest sugar-producing state. The unseasonal rains have also submerged large sugarcane growing areas in neighbouring states of Andhra Pradesh and Karnataka.
The flooding has forced the sugar mills in Maharashtra and Karnataka to delay their crushing season by 10-15 days which generally begins by the middle of October. In case of sugar mills in Andhra Pradesh, the rains would not make much of a difference because the state had a very poor cane crop and hence crushing will not begin before November-end.
In 2008-09, sugar output in India, the world’s second biggest producer after Brazil, fell more than 40% to about 15 million tonnes (MT) forcing the country to allow duty free imports. The retail prices of sugar has already touched Rs40 per kg.
During the new season that starts from October, the sugar production in the country is likely to be about 16-17MT. India consumes about 23MT of sugar a year and is expected to import about 9MT.
Speculations of India increasing its import due to supply constraints will also have its impact on the sugar prices globally. As India will celebrate Diwali this week, demand for sugar is expected to go up. Record price and supply crunch have prompted the government to impose stock limits on bulk sugar consumers, wholesale traders and retailers to check hoarding. Market sources expect the production to be impacted by 20% and the sugar price to rise by 30%.
Among the leading sugar companies, Bajaj Hindusthan which is entirely based in Uttar Pradesh won’t be adversely affected by the Maharashtra floods but the company is still vulnerable to sugarcane availability. According to market sources, to overcome the supply issues, Shree Renuka Sugars, India’s biggest refiner is planning to acquire Equipav SA Acucar e Alcool, the sugar and alcohol assets of Brazil’s Equipav Group.
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