Sugar production jumps 37%

India's sugar production in the October-April period of the 2006-07 sugar season has jumped by 37 per cent to a record 25 million tonnes against last season's corresponding figure of 18.18 million tonnes.

The country is likely to end the season with a production close to 27 million tonnes.

According to the provisional data available with the National Federation of Cooperative Sugar Factories (NFCSF), domestic sugar production as on April 30 was 25 million tonnes. This is against the initial government estimates of 22.7 million tonnes and the industry estimates of 25 million tonnes for the whole 2006-07 season.

Among the states, Maharashtra is leading with a production of 8.24 million tonnes, followed by Uttar Pradesh at 7.96 million tonnes and Karnataka at 2.25 million tonnes.

"Though mills in various states have ended their crushing operations, a number of them are still operational. We are likely to end up producing nearly 27 million tonnes of sugar this season against last year's 19.2 million tonnes, and a consumption demand of 19 million tonnes," said Vinay Kumar, managing director of NFCSF.

However, with the rising sugar production and static demand, the market sentiment in sugar is getting affected. Prices are falling regularly. Companies are not even able to recover the cost of production.

"The cost of producing one quintal of sugar is about Rs 1,550. However, we are not realising more than Rs 1,300 per quintal on sugar, thereby incurring a loss of Rs 250 on each quintal we produce," said Vivek Saraogi, managing director of Balrampur Chini Mills.

Rising output may extend the past year's 33 per cent drop in prices of refined sugar in London. Bumper crops in Brazil, India and Thailand may create a 8.5 million-tonne surplus, 18 per cent larger than forecast in February, Peter Baron, chief executive officer of the International Sugar Organization said in an April 13 interview in Mumbai.

India's sugar output may reach 26.5 million tonnes this year and 27 million in 2008 as mills in some regions continued to crush cane, Federation's Kumar said.

His estimate compares with 27.43 million tonnes forecast by the Foreign Agricultural Service at the US embassy in New Delhi in a report dated April 20.

The US agency expects output to rise to 28.79 million tonnes next year. Sugar cane production may reach a record 315.5 million tonnes, up 12 per cent from a year earlier, as farmers increased planting last year to gain from higher prices, according to the farm ministry.

The bumper output has raised the pressure on the government to build stockpiles and give export incentives to prevent a glut. Mills based in coastal states receive Rs 1,350 ($33) a tonne, while those located inland get Rs 1,450 a tonne.

(With inputs from Bloomberg)