India grapples with a 10.7% decline in sugar production by mid-December, conflicting reports from major associations, and a policy shift barring ethanol diversion. Despite seasonal delays in Maharashtra and Karnataka, concerns arise over the impact on the sugar-ethanol balance. Industry protests prompt a compromise, allowing mills to divert 1.7 million tonnes for ethanol, offering relief amid a looming financial threat to distillery projects.
Highlights
Declining Sugar Production: Sugar production in India has continued to decline, with output until December 15 being 10.7% lower compared to the same period last year.
Discrepancy in Data: Two major sources, the Indian Sugar Mills Association (Isma) and the National Federation of Cooperative Sugar Factories (NFCSF), report slightly different figures. Isma states that around 7.40 million tonnes were produced, while NFCSF's crushing report shows a 9.2% year-on-year decrease at 7.43 million tonnes.
Seasonal Factors: The sugar season in India runs from October to September. Both Isma and NFCSF cover nearly all sugar companies in India, whether private or cooperative. Factors such as delayed starts in sugar factories in Maharashtra and Karnataka by 10-15 days compared to the previous year are noted.
Impact on Ethanol Production: The declining sugar production figures are likely to impact hopes of increased diversion of sugar for ethanol production. The government had earlier prohibited such diversion this year.
Government Decision and Industry Reaction: The government's sudden decision on December 7, 2023, to ban ethanol production created worry and confusion in the sugar industry. The decision was later modified on December 15, allowing mills to divert 1.7 million tonnes for ethanol production, compared to the earlier estimated 4 million tonnes. The sugar industry, which had invested significantly in ethanol production capacity expansion, faced financial risks due to these sudden policy changes.
Compromise and Relief: Following industry protests, a compromise was reached between the government, oil-marketing companies, and others. The modification in the government's decision on December 15 provided some relief to the sugar industry, allowing for the diversion of a reduced quantity (1.7 million tonnes) for ethanol production.
Conclusion
India's sugar sector faces a complex scenario with declining production, conflicting data, and policy uncertainties. The compromise on ethanol diversion offers a partial solution, mitigating financial risks for invested projects. The industry's resilience and adaptability will be crucial as it navigates challenges and strives for stability in the dynamic sugar and ethanol landscape.