Sugar production to increase 16-20 per cent in 2018: ICRA

Sugar production in India is expected to increase by 16 to 20 per cent in 2018 to around 24.5 million MT, according to credit ratings agency ICRA. Even with this increase, the production is likely to be matched with consumption, resulting in stable prices. On the negative side, increase in cane costs for the coming crushing season are likely to impact margins from Q4FY2018 onwards.

Meanwhile, an increase of 11 per cent in fair and remunerative price (FRP) to Rs 255 per quintal by the Cabinet Committee on Economic Affairs (CCEA) might pinch millers in Tamil Nadu and South Karnataka, who saw poor rainfall during the sowing period, though millers in Maharashtra and Uttar Pradesh might be less impacted by the price increase as they received good rains, which boosting production.

The units located in Maharashtra and North Karnataka are likely to reap the benefits arising out of higher production, even though they are likely to be negatively impacted by higher costs. The mills located in the Cauvery region of South Karnataka and parts of Tamil Nadu will be adversely affected due to the double whammy arising out of both higher cane prices as well as limited prospects of volume growth.