June 2019

Interaction with sugar consultants

By VIKRAM SURYAVANSHI

Production for SS (sugar season) 2019-20 will be 28-29mn tonnes vs. a historical high of 33mn tonnes in SS18-19. Maharashtra expected to report production fall of c.4mn tonnes to 6.0-6.5mn yoy, majorly because of drought and fall in acreage.

• Moreover 1mn tonne of sugar will be used for ethanol production.
• Inventory at the end of SS 2018-19 seen at 14mn tonnes, which is approximately 50% of domestic consumption. Only way to liquidate the excess stock is through exports.
• Sugar export for SS2018-19 was c.3.2mn tonnes and likely to end at 3.5-3.6mn tonnes in 2019-20.
• Distillation capacity has expanded across all players leading to sharp increase in ethanol production, but feedstock is becoming a problem. Government is aiming at 15-20% ethanol blending. Per tonne prices of molasses have risen – from Rs 250 earlier to Rs 3,000 per tonne now.
• Ethanol production using A Heavy molasses needs additional infra, fermenter, storage facilities (as sugar content is high), hence not a viable proposition. The production from B heavy molasses can improve the ethanol blending upto 15% for the country compared to 7.5% now.
• UP is getting benefits from all parameters (due to: fall in production in Maharashtra, rising ethanol production, stable cane prices)
• Recovery rate for UP has risen to 11.5-12.0% from 9.5% earlier. Overall cane quality has seen a significant improvement, which has resulted in improvement acreage.
• UP state won’t see Greenfield expansion; rather, players will opt for brownfield expansion and the inorganic route.
• UP tariff revision is on cards, which takes place every five years. Expect power tariff to reduce by Rs 1.0-1.25 per unit. The current tariff in UP to procure bagasse-based power is Rs 4.8 per unit.