The agency said the continuation of the export subsidy on raw sugar would be key to relieve pressure from surplus sugar stocks and also to support the domestic prices.
ICRA expects the domestic sugar production to increase by 3.3-3.7 per cent year-on-year (YoY) to around 25 million tonnes in 2014-15 marketing year (October-September).
"...The domestic sugar production is expected to outstrip domestic consumption for fifth year in a row," ICRA said in its recent study on Sugar Industry.
Liquidation of sugar stocks by the mills following court action in UP has also affected the sugar prices in September, it added.
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ICRA expects pressure on sugar realisation in the near term due to surplus stocks.
"The continuation of the export subsidy remains critical to relieve pressure from the domestic sugar stocks and support the domestic sugar prices to an extent...Going forward, with the range bound realisations and high cane prices, continued government support remains critical for viability of the sugar mills in 2014-15," ICRA said.
High cane price of Rs 280/quintal declared by the UP state government continues to impact the profitability of the UP sugar mills. However, the government has announced a provision of Rs 20/quintal, with around Rs 15.20 as reimbursement and remaining as exemption from levies.
India is the second largest producer of sugar after Brazil and is the biggest consumer.