India's sugar output to fall below demand amid cane shortage

India's sugar production in 2016-17 is likely to fall to 22 million tonnes (mt), down 4.3 per cent from an earlier estimate, as mills in key producing state are closing early due to a cane shortage, Reuters quoted industry officials as saying.

A drop in production below India's consumption of around 25 million tonnes could lift prices and prompt the world's second-biggest sugar consumer to allow duty-free imports of the sweetener, supporting global prices that are already trading near their highest level in 18 months.

In the past two years, back-to-back droughts have ravaged the cane crop in Maharashtra, the country's top sugar producing state.

"The impact of drought was much more severe in Maharashtra than we anticipated. The state could end up with production of around 4.5 million tonnes," B B Thombre, president of the Western India Sugar Mills Association (WISMA), told Reuters on Thursday.

WISMA was earlier expecting the country to produce 23 mt of sugar in the 2016-17 crushing season that started on 1 October, anticipating Maharashtra will churn out 5.5 mt.
 
As Maharashtra's output has been revised down, the country's total production could fall to 22 mt, Thombre said.

Maharashtra had produced 8.41 mt of sugar in the 2015-16 season, while India's total output was 25.1 mt. Sugar mills in Maharashtra typically operate between November and April but this year so far 25 mills have stopped crushing due to lower cane supplies.

"Some sugar mills have already closed operations due to cane shortage and most mills will close operations by February end," Sanjeev Babar, managing director of the Maharashtra State Co-operative Sugar Factories Federation, said on Wednesday.

Local prices are moving up on an expected shortfall in output and could prompt the government to allow duty-free imports of the sweetener, a Mumbai-based dealer with a global trading firm said on Wednesday.

"Ahead of state elections the government will try to keep a lid on prices. Right now it is more interested in protecting consumers than farmers," the dealer told Reuters.

The Election Commission of India on Wednesday scheduled five state polls for the next two months that will test support for Prime Minister Narendra Modi's move to abolish high-denomination banknotes.