Sugar Output Soars 22%, Stocks Tumble as Mills Face Margin Squeeze

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AuthorKavya Nair|Published at:
Sugar Output Soars 22%, Stocks Tumble as Mills Face Margin Squeeze
Overview

Indian sugar stocks declined on Friday, even as production jumped 22% to 159.09 lakh tonnes by January 15, according to ISMA. The surge in sugarcane prices and falling ex-mill sugar realisations are squeezing mill finances, raising concerns over farmer payments and prompting calls for an early Minimum Selling Price revision.

Sugar Stocks Slip Despite Production Surge

Indian sugar companies saw their shares fall on Friday, January 16, despite an optimistic production report from the Indian Sugar Mills Association (ISMA). Balrampur Chini Mills, Shree Renuka Sugars, Dalmia Bharat, Bajaj Hindusthan Sugar, and EID Parry (India) Ltd. all traded between 1% and 2% lower in the afternoon session.

Production Hits New Highs

ISMA announced that all-India sugar production had climbed 22% to 159.09 lakh tonnes as of January 15. This marks a significant increase from the 130.44 lakh tonnes produced during the same period last year. The number of operational sugar mills also saw a slight rise to 518, up from 500. Uttar Pradesh, Maharashtra, and Karnataka led the production gains, with Maharashtra alone reporting a 51% jump to 64.5 lakh tonnes.

Margin Pressure Mounts

Despite the increased output, the industry faces severe financial headwinds. Governments in key sugar-producing states, including Uttar Pradesh and Karnataka, have raised sugarcane prices. The Bihar government recently increased its agreed cane price by ₹15 per quintal to ₹380. This rise in input costs is widening the gap with declining ex-mill sugar realisations, which have fallen to around ₹3,550 per quintal in Maharashtra and Karnataka. These prices are now significantly below the cost of production.

Financial Strain and Arrears

The persistent mismatch between rising cane and sugar production costs and lower realisations is putting immense pressure on mill finances. ISMA warned that mounting operational and cash flow stress could lead to increasing cane payment arrears to farmers if current market conditions persist.

Call for Price Revision

To restore financial viability and ensure timely payments, ISMA urged an early revision of the Minimum Selling Price (MSP) for sugar. The association stressed that an aligned MSP, reflecting rising production costs, is crucial for market stability without imposing an additional fiscal burden on the government.

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