InvestorQ : Is it true that India’s sugar output has gone up substantially in the last few months? What does that mean for sugar stocks like Dhampur, EID Parry, Balrampur and Dwarikesh?
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Is it true that India’s sugar output has gone up substantially in the last few months? What does that mean for sugar stocks like Dhampur, EID Parry, Balrampur and Dwarikesh?

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NISHA Nayak answered.
4 months ago
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Let me talk about the sugar output situation first and then move to the specific stocks. According to the Indian Sugar Mills Association or ISMA, India’s sugar output is up 31% at 14.27 million tonnes in the first three-and-half months. When we talk of sugar, it has a marketing year that stretches from October to September next year.

The typical sugar cycle in India begins in October each year and extends all the way to September next year and here we are talking about the first 3.5 months of the current sugar cycle which extends from October 2020 till mid-Jan 2021. For the full sugar cycle 2020-21, the ISMA has projected total sugar output at 31 million tonnes.

It may be recollected that in the previous sugar cycle year 2019-20, India had produced 27.4 million tonnes of sugar, so a 13% growth looks likely this year. India is already the world’s second largest producer of sugar after Brazil. Within India, Uttar Pradesh is the largest producer of sugar followed by Maharashtra and Karnataka follows in third place.

In the last few years, the government has consistently subsidized the export of sugar with a specific budget allocation since the cost of producing Indian sugar are sharply higher compared to other major producers in the world like Brazil and Thailand. This subsidy gives a level playing field to Indian sugar companies in the global market, despite WTO objections.

Sugar prices have to be kept remunerative and for that supply has to be managed. Otherwise sugarcane farmers will suffer and that is sensitive politically. For all the sugar companies, the government has given a commitment that excess supply will be allowed to be exported. Hence sugar companies should stand to benefit.

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