India's sugar demand to improve further as govt relaxes lockdown rules: ISMA

With further relaxations in COVID-19 lockdown rules, sugar demand in India, the world's second largest producer of the sweetener, has started picking up and will further improve with opening of hotels and restaurants, industry body ISMA said on Tuesday.

The government has extended the nationwide lockdown till June 30 with a phased plan to unlock India. Malls, hotels, restaurants and places of worship can open on June 8 except in areas with the most number of coronavirus cases.

According to the Indian Sugar Mills Association (ISMA), the demand for sugar has started picking up from the beginning of May with the lockdown rules getting relaxed.

"Now that the country is entering the unlocking phase, and restaurants and malls are also being allowed to open, demand for sugar will further go up in June, as compared to May 2020," it said in a statement.

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Therefore, along with the summer demand, it can be expected that sugar mills may be able to sell the entire June quota, along with the carry forward from May, it added.

The government has allowed mills to sell 17,00,000 tonnes of sugar in May and 18,50,000 tonnes in June. The government has also extended the sale period of May quota for a month.

ISMA said that sugar sales during April month were at par with the year-ago period, thanks to additional sales of 10 lakh tonnes that took place at the end of February this year.

Mills in North India have sold sugar as per their monthly quotas given for May, but the sugar mills in west and south India have a small quantity of unsold quota of May, it said.

"With demand picking up, and an expected increase in demand to refill the pipeline, which will come sooner or later, sugar sales in the 2019-20 sugar season ending September may be around 5 lakh tonnes less than last year," it added.

On the production front, ISMA said total output has reached 26.82 million tonnes in the first eight months of the 2019-20 season (October-September), but still lower than 32.75 million tonnes achieved in the year-ago period.

The industry body said total sugar production, however, could reach 27 million tonnes, higher than its earlier estimate of 26.5 million tonnes for the current season because sugarcane has not got diverted for gur and khandsari making this time as operations in Uttar Pradesh remained shut due to the lockdown.

That has resulted in extra sugarcane crushing by the UP mills and an additional 5,00,000-6,00,000 tonnes of sugar production is expected in the current season, mainly from Uttar Pradesh, from a special season in Tamil Nadu and Karnataka, it added.

Overall sugar output is expected to be still lower by 6 million tonnes from the 33 million tonnes achieved in the 2018-19 season.

As per the latest data, sugar production in Uttar Pradesh, the country's largest producer of the sweetener, has increased by 7,65,000 tonnes to 12.54 billion tonnes till May of this season. Around 14 mills are still operating.

In Maharashtra, the country's second largest sugar producing state, the output has declined sharply to 6.09 million tonnes so far this season from 10.72 million tonnes in the year-ago period.

Sugar output in Karnataka, the country's third largest producing state, has reached 3.38 million tonnes so far. Few mills operated in the special season beginning from July and could produce over 1 lakh tonnes of sugar. However, total sugar output is expected to be lower than 4.32 million tonnes achieved last year.

On ethanol production, ISMA said oil marketing companies have floated a tender on June 1 seeking bids for supply of another 99 crore litres of ethanol from July to November of this year. The procurement price was fixed in August 2019.

This confirms that there will be no changes in the ethanol procurement prices or in the ethanol blending policy with petrol, it added.