High sugar production estimate crucial for pushing through decontol

NEW DELHI: In the thick of a decontrol discussion pegged mainly on firm sugar output estimates for the 2010-11 sugar year, the sugar industry has pegged production numbers at a minimum of 25mt , which is atleast 2mt over the rough 23mt estimates suggested by the food ministry earlier this month.

The current industry estimate, made by the Indian Sugar Mills Association (ISMA) last week, is a good 19% higher than the 18.7mt estimated for the current (2009-10) year and is expected to put paid to two consecutive years of shortfall.

ISMA, which has been pressuring the food ministry intensely for early sectoral decontrol on the contention that sugar output in the coming year is likely to be bumper, is understood to have came up with the production estimate despite the fact that all the mills did not submit cane acreage figures. There were also reportedly differences among members over whether to stick to a higher end estimate spelling out maximum cane production or vice versa.

Production could even be as high as 28mt in the coming year, maintained one ISMA member, reinforcing the perception that coming up with even a rough estimate now is likely to be fraught with problems. Last week, food minister Sharad Pawar sent sugar stocks soaring after he said that he would suggest sectoral decontrol to the Cabinet after sugar output estimates firmed up in August. But both industry and the government have had serious credibility issues over coming up with timely and accurate estimates, leading to high sugar retail prices, artificial supply shortages, marked increase in global white/raw sugar prices and expensive imports. In May, Mr Pawar had projected sugar output
of 25mt for the 2010-11 sugar year but the food ministry later pared that down to only 23mt..

Sugarcane acreage figures released by the food ministry have pegged coverage upto July 9 at 47.37 lakh hectares over 41.79 lakh ha same time last year. At just 6 lakh ha over last year, there has barely been much improvement in acreage in the last two weeks, leading to sector observers maintaining that sugar output for the year still looks unfavourable. Infact, 2009-10 experienced the worst drought in over three decades, leading to very low sugar production estimates of just over 14m initially for the 2009-10 year and comparision of acreage over last year is not seen as a good indication of a bumper crop at this juncture. In key cane state UP, figures still remain extremely iffy. Points out Prof Sudhir Panwar of the Kisan Jagriti Manch The output estimates being put out by the industry and the government will pressure down cane price for farmers, More importantly, they have no real basis at this juncture.

Cane planting is at a very primary stage. In UP , it takes place in July-September. A Delhi based sectoral monitor said. There is little credibility in the current estimate. After the estimate bloomers that led to high sugar prices in the last several months, we cannot risk iffy estimates for a crucial decision like sectoral decontrol, also since sugarcane and foodgrain output are inter-related,

For 2009-10, the government had, pegged sugar output at a low of around 14-15m tonnes. This was endorsed roughly by the industry. The estimates, which spelt a big shortfall between an estimated annual consumption of 23 mt and the annual production, served to shoot up sugar prics to phenomenal highs in domestic and global markets. Infact, sugar prices shot up to record highs in the latter, spurred by zero duty on imports. Retail sugar prices dropped by March from January highs of almost Rs50/kg to around Rs 30-32/kg but still remain high.

source: ET