The outlook for Indian sugar industry is negative for the season 2007-08 (October-September) mainly due to the uncertainty surrounding the issue of cane pricing, which has a direct bearing on a producer’s profitability as well as the reinstatement and terms of the UP sugar policy, according to Fitch Rating.
The agency noted that in the coming season, it is estimated that India may produce 28 million tonne of the sweetener compared with the 31 million tonne initially forecast.
On the back of lower-than-anticipated production, domestic sugar prices are undergoing an upward trend as of January 2008.
Sugar prices in Uttar Pradesh that were running at Rs 1,375 per quintal when the mills began crushing, are now quoted at Rs 1,480-1,500 per quintal (beginning January 2008), the agency said, in a report released by Fitch Rating on Indian Sugar Outlook 2008.
The sugar season of 2006-07 underwent significant moves. A glut in supply due to record production, coupled with a seven-month ban on exports, prompted sugar prices to fall from a record high of Rs 1,800 per quintal to a low for the season of Rs 1,150 per quintal.
Against this backdrop of rising global prices and the transport subsides provided by the government, the country expects to export around 3 million tonne of sugar in the 2007-08 season compared to 1.7 million tonne in the year before, report said.