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Sugar Industry Back On Track With Transformation Plan: CARE Ratings

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With tight global demand-supply scenario, favourable policies, exports, and ethanol blending doing their bit in rationalizing the inventory levels in India, CARE Ratings believe that the sector is on track with its transformational plan.

 

"With considerable increase in ethanol sales and demand-supply balance evening out, integrated sugar mills are expected to witness sustained increase in their cash flows going ahead. Running on the highly remunerative global prices, the industry is all set to meet its export target of 6 million tonnes (MT) in this sugar season (SS)," the ratings agency has said in a report.

Furthermore, with the expected dip in the Brazilian production due to poor cane crop and reduced crushing capacity in that country, CARE Ratings believes the export dynamics are expected to prevail over the next SS as well.

Sugar Industry Back On Track With Transformation Plan: CARE Ratings

"With ethanol blending by oil marketing companies (OMCs) picking up pace and with the Government's stance on increasing the blending targets to 20% supported by the remunerative ethanol pricing and incentive schemes to build up capacities to achieve the same, the economics of sugar industry are getting better. By 2023 India is planning to have zero surplus sugar by diversion to ethanol and the recent move of advancing the 20% ethanol blending by government by two years from 2025 to 2023 is a step forward in achieving the same," CARE Ratings has said.

 

Sugar prices are up

Global sugar prices (raw sugar) have moved up from the lows of 10.2 c/lb in April 2020 to 16.5 cents/lb in May 2021. The initial growth in prices was backed by the unlocking of global economies and improvement in international sugar demand. In addition to this, expected lower sugar output in the European Union (world's third largest sugar producer) and Thailand (second largest global sugar exporter) and uncertainty over Brazil's diversion of cane crop towards sugar for the SS 2020-21 led to the upward trend in international sugar prices moving ahead.

"Including the export subsidy which the government announced in Dec 2020, average realisations for the Indian exporters in white sugar at London and raw sugar prices at New York averaged Rs.38.7 per kg and Rs.31 per kg, respectively, during 1 January-24 February 2021 for the Indian exporters. The average wholesale sugar prices in India averaged Rs.32.9 per kg during the same period which indicates support from the international sugar prices for Indian sugar mills to export sugar," CARE Ratings has said.

Read more about: industry sugar
Story first published: Wednesday, June 9, 2021, 11:31 [IST]
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