While domestic sugar output is set to decline to 25-26 million tonnes in this year as against 28.4 million tonnes in the previous year, production next season is expected to decline further to 21-22 million tonnes owing to a sharp decline in sugarcane plantations.
Sugar prices have also increased since crushing season began in October last year. The ex-factory price in Uttar Pradesh is ruling at about Rs 1,500 a quintal, up about 9 per cent since October. A further drop in output would provide further support to market prices.
Unhappy with the irregularities in payments, farmers are planting fewer sugarcane crops. The increase in the minimum support price (MSP) of crops, such as wheat and paddy, will also prompt growers to divert land from sugarcane.
Last season, mills were unable to make regular payments owing to a loss in realisation caused by high cane prices and low sugar rates.
Ethanol blending in petrol, currently at 5 per cent, is likely to go up to 10 per cent from October this year. This would provide stable revenues to the companies. At 10 per cent, annual ethanol demand is set to double to 1,200 million litres.
