Indian sugar output to increase by 2% in 2022-23

Indian sugar output to increase by 2% in 2022-23

Indian Market
by 5paisa Research Team Last Updated: 2022-10-18T17:55:19+05:30

The sugar cycle year (SCY) is likely to be another bumper year for the sugar industry. But first a quick word on what this sugar cycle year is all about? In India, sugar follows a distinct cycle stretching from October to the next September. So, in the Indian context, when we refer to the sugar cycle year (SCY) 2022-23, we are referring to the period from October 2022 to September 2023. India has currently just completed SCY 2021-22 and commenced SCY 2022-23. The projections of 2% growth we are referring to is the growth in sugar output during this particular October to September period, compared to previous SCY.

Now, back to numbers. India is expected to produce close to 36.50 million tonnes of sugar in the SCY 2022-23, which is 2% higher than the 35.8 million tonnes of sugar output achieved by the Indian sugar industry in the previous SCY 2021-22. In the last few years, India has emerged as the world’s largest producer of sugar and the second largest exporter of sugar in the world. Remember, India’s traditional white sugar that is crushed does not find too many buyers in the international market. Hence, most of the sugar exports that India sees is largely on account of raw sugar that is sent out of India.

Now remember, when we talk of sugar production, we are talking of the net production after allocating sugar or sucrose for the purpose of ethanol production. For SCY 2022-23, India is expected to divert about 4.5 million tonnes of sugar for ethanol production. Net of that, the total sugar output in SCY 2022-23 would be 36.5 million tonnes. In the last SCY 2021-22, India had diverted 3.4 million tonnes of sugar for ethanol. With that quota increased to 4.5 million tonnes of sugar in SCY 2022-23, India should comfortably on target to achieve the ethanol blending target of 12% of petrol by the middle of next year.

How much will India produce and export in SCY 2022-23? 


The table below captures the gist of how the export targets are arrived at. According to the ISMA (Indian Sugar Mills Association), an ideal export target for SCY 2022-23 would be around 8 million tonnes which will ensure a good price for the sugar and also sufficient domestic availability. Check the table below.

 

What ISMA estimates

For the SCY 2022-23

Opening stock of sugar on 01st October 2022

6 million tonnes

Expected sugar production in the year

41 million tonnes

Sugar Diversion

4.50 million tonnes

Net sugar production after diversion

36.5 million tonnes

Total sugar available (including opening stock)

42.50 million tonnes

Domestic Consumption

27.50 million tonnes

Ideal Export Target

9 million tonnes

Preferred closing stock of sugar

6 million tonnes

 

Clearly, the export target to maintain equilibrium in sugar prices would be around 9 million tonnes. The government has permitted 5 million tonnes of sugar exports up to March 2023, by which time there should be a clear picture of how the rest of the year would pan out. However, the real concern in the Indian context is the overt dependence on the state of Maharashtra even among the 4 states which are the largest sugar producers.

 

Name of the State

Total Exports in SCY 2021-22

Share of Total Exports

Maharashtra

6.37 million tonnes

61.46%

Karnataka

1.53 million tonnes

14.78%

Gujarat

1.25 million tonnes

12.07%

Uttar Pradesh

0.97 million tonnes

9.33%

 

As we can see in the above table, the four states account for more than 98% of sugar exports out of India. But the dependence on Maharashtra to fill the export coffers is huge. Any impact of monsoons in the state of Maharashtra could have deep impact on the sugar export story. That is because, the largest producer of sugar in India, Uttar Pradesh, is a marginal exporter of sugar.


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