Sugar production: This season, it is under-estimation

If 2008-09 was a year of the Centre and the industry both overestimating the country's sugar output, the 2009-10 season is turning out to be just the other way round.

At the start of the 2008-09 sugar season (October-September), the Centre reckoned production at 220 lakh tonnes (lt), assuming Uttar Pradesh (UP) to contribute 70 lt and Maharashtra 61 lt. As the season progressed, these were pared, first to 205 lt, 62 lt and 57 lt and then to 188 lt, 59 lt and 51 lt, respectively.

Even right up to August, the Centre maintained production to be in the 150-155 lt range. However, when the season ended, the final all-India number came to 145.38 lt, while being 40.64 lt for UP and 45.78 lt for Maharashtra. And predictably enough, the Union Food and Agriculture Minister, Mr Sharad Pawar, laid the blame for this divergence of nearly 75 lt between initial and final estimates on the industry.

At the Indian Sugar Mills Association's annual meeting on December 22, Mr Pawar even threatened to penalise factories for “late and incorrect reporting” of their production figures to the Sugar Directorate. This time though, it is quite the opposite. On November 6, the Food Ministry convened a meeting of State Cane Commissioners and based on their inputs, production for the 2009-10 season was pegged at 146.14 lt. This included 47 lt from Maharashtra and 39.60 lt from UP.

While the Centre stuck to this internal estimate (while publicly proclaiming a 160 lt figure), the industry put it a tad lower at 140-145 lt. By January, the consensus within the trade was a production of below 140 lt, with some even venturing a sub-130 lt number. All that was enough for sugar prices to hit the stratosphere, as ex-factory realisations surged by about Rs 10/kg between Christmas and mid-January. But since then, prices are back to – actually lower than – where they were and, worse, seemingly headed further down.

The trigger, again, is production, which is now seen to top 170 lt (according to Mr Pawar), with the National Federation of Cooperative Sugar Factories expecting it even higher at 180-185 lt. The way output estimates have been revised upwards – and may well be revised further – is better captured by looking at just Maharashtra and UP.

Maharashtra mills were originally anticipated to crush just 410 lt cane, which, on an average 11.5 per cent recovery, would have yielded slightly over 47 lt of sugar. But as on March 31, crushing for the ongoing season had touched 531.11 lt, with corresponding sugar production of 60.81 lt. The latest projection of total crushing and production for the season are 560 lt and 65 lt, respectively.

Likewise with UP which looks set to produce 50-52 lt, against the initial sub-40 lt estimate. In both States, it appears mills simply did not account for the possibility of higher cane yields due to farmers taking extra interest in their crop this time. “We failed to gauge the grower's enthusiasm for applying more fertilisers and other inputs in view of remunerative cane prices, just as we last time underestimated his anger and indifference on not being paid adequately and in time”, a UP miller admitted.

source: thehindubusinessline