Sugar production in India could rise 1.5 per cent in 2018/19 to a record 33 million tonnes, increasing inventories in the world's second-biggest producer and putting pressure on local prices, a producers' body said on Friday.
The record production could force the central government to continue incentives for overseas sales of sugar into the next season, weighing on global prices, which are now trading near their lowest in four months.
In the first seven months of the 2018/19 marketing year that started on October 1, mills have churned out 32.1 million tonnes of sugar, 3 per cent more than in the same period a year earlier, the Indian Sugar Mills Association (ISMA) said in a statement.
The production of sugar in the country stood at 32.5 million tonnes for the whole of the 2017/18 marketing year.
"The sugar recovery in northern India has been substantially better than the sugar recovery achieved in the last season," the association said.
Years of bumper cane harvests and record sugar production have hammered domestic sugar prices, making it hard for mills to pay monies owed to farmers, who form an influential voting bloc.
The country's money-losing sugar mills have run up a record $4.38 billion in arrears to 50 million cane farmers, who have gone unpaid for their produce for more than a year.
To bring down cane arrears and reduce rising inventories, the Centre has been providing incentives to mills for overseas sale of sugar and set an export target of 5 million tonnes.
But mills are likely to export only 3 million tonnes of sugar in the current marketing year due to a drop in global prices, according to ISMA estimates.
That means the country's sugar inventory levels will rise to 14.7 million tonnes at the beginning of the new season on October 1, 2019, up 37.4 per cent from a year ago, the trade body said.
The industry has been hoping the 2019/20 season's output could drop due to higher ethanol production and a drought in the western state of Maharashtra, the country's second-biggest sugar-producing region.
"With additional ethanol production capacities getting installed and expanding existing capacities at a very fast pace ... (that) in turn will further reduce sugar production in the next season," the trade body said.
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