Prelude:
The sugar industry in India is facing a challenging start to the 2023-24 season, with sugar production registering a significant dip of up to 11%. Both the Indian Sugar Mills Association (Isma) and the National Federation of Cooperative Sugar Factories (NFCSF) have reported a decline in production, sparking concerns and discussions within the industry.
Delayed Start of Mills: One of the primary reasons behind the decline in sugar production is the delayed start of mills in key states like Maharashtra and Karnataka. According to Isma, sugar factories in these states began operations 10-15 days later than the previous year. This delay has contributed to a lower output of approximately 7.40 million tonnes by December 15, a 10.7% decrease compared to the same period last year.
Impact on Ethanol Diversion: The data released by Isma and NFCSF has further dampened hopes of an increased diversion of sugar for ethanol production this year. The government’s recent decision to prohibit sugar mills from producing ethanol from sugarcane juice or syrup has added to the challenges faced by the industry. This move, aimed at stabilizing sugar prices and improving availability, has created uncertainty and worry among sugar producers.
Government’s Policy Shift: On December 7, 2023, the central government surprised the industry by abruptly stopping sugar mills from producing ethanol. This decision, intended to prevent excess sugar loss, would have returned approximately 2.3 million tonnes of sugar back into available stocks. The move faced widespread protests from the sugar industry, leading to a compromise worked out by the food ministry, oil-marketing companies, and other stakeholders.
Compromise and Relief: In response to the industry’s concerns, the government modified its initial decision through a December 15 order. Under the revised plan, mills will be allowed to divert 1.7 million tonnes for ethanol production, which includes sugarcane juice. This is a significant reduction from the earlier estimate of 4 million tonnes but provides some relief to sugar producers. Jaiprakash Dandegaonkar, president of NFCSF, acknowledged the government’s efforts to address the worries and confusion created by the sudden ban on ethanol production.
Looking Ahead: Despite challenges posed by delayed mill operations and policy shifts, states like Maharashtra, Uttar Pradesh, and Karnataka have maintained their momentum in sugarcane and sugar production. The NFCSF remains cautiously optimistic, hoping that if the current trajectory continues, India may end up producing around 29.1 million tonnes of net sugar in the 2023-24 season – a 12% decrease from the previous year.
The Indian sugar industry is navigating through a complex landscape marked by delayed starts, policy changes, and compromises. As the season progresses, stakeholders will closely monitor the industry’s performance, hoping for a recovery in production and stability in the face of evolving challenges.