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Synopsis
• Sugar production is estimated to be 340 lakh tonnes in SS 2022-23, as compared to the peak of 358 lakh
tonnes produced in the previous SS 2021-22; with the highest ever diversion towards ethanol estimated at
45 lakh tonnes (higher by 41% y-o-y), according to the Indian Sugar Mills Association (ISMA). This increasing
diversion towards high realisation ethanol is likely to support 8-12% revenue growth for sugar mills this fiscal.
By the year 2025, the government is targeting to divert 60 lakhs tonnes of excess sugar towards ethanol
annually.
• As of February 15, 2023, sugar production increased by ~5.5% on a y-o-y basis, wherein the major output
contribution is from Maharashtra, Uttar Pradesh and Karnataka similar to last SS 2021-22. For export sales,
the sugar export quota is set at 60 lakh tonnes by the government in the current SS, which is still lower than
exports made of 72 lakh tonnes and 112 lakh tonnes in the SS 2020-21 and SS 2021-22, respectively. The
additional sugar export quota will be decided after evaluating the current demand-supply scenario.
Furthermore, a GST reduction from 18% to 5% coupled with any additional export quota announcement by
the government, could support the sugar mills’ performance in the near term.
• The price of ethanol derived from the C heavy molasses route to be increased by ~6% to Rs. 49.41 per litre.
The price of ethanol derived from B heavy molasses route and direct route (sugarcane juice/ sugar/sugar
syrup) to be increased by ~3% to Rs. 60.73 per litre and Rs. 65.61 per litre respectively, which in turn will
incentivise sugar mills for high margin ethanol production and support its profitability.
• “The revenue for sugar mills is estimated to increase by 8-12% in FY23, based on analysis of top players
accounting for about 50% of the organised sugar industry. The growth is expected to be supported by
addition in installed capacity for sugar production and distilleries along with increase in ethanol blending
target and price. With the government's continuous support towards the sugar sector and increasing focus
on diversion towards ethanol production to promote Ethanol Blending Program in India, the sugar sector is
likely to gain traction going forward," Tanvi Shah, Director, CareEdge Advisory & Research, said.
1
Revenue for sugar mills expected to rise by 8-12% in FY23
358
323 332
312
274 261 268
254 255 253
Lakh Tonnes
112
59 72
38
6
Source: CMIE
Wherein the growth has been recorded for production and consumption at a CAGR of 2.6% and 1.4% respectively
in past five years. Moreover, the highlight of this season was sugar exports. With a consistent increase in surplus
sugar production, the country’s sugar exports grew by 105% CAGR to 112 lakh tonnes this season.
The total sugar production in Maharashtra is estimated to decline to 121 lakh tonnes in SS 2022-23 from 137 lakh
tonnes in the previous season. Karnataka is likely to witness a decline to 56 lakh tonnes, whereas Uttar Pradesh
may observe a minor decline to 101 lakh tonnes from 102 lakh tonnes in the previous season.
Table 1: SS 2021-22 Sugar Production vis-à-vis Estimated Sugar Production for SS 2022-23
SS 2022-23 SS 2022-23
Unit SS 2021-22
(1st AE) (2nd AE)
Lakh
Estimated Sugar Production (before Diversion) 390 410 385
tonnes
Lakh
Estimated Sugar Diversion 32 45 45
tonnes
Lakh
Actual Sugar Production (After Diversion) 358 365 340
tonnes
AE – Advanced Estimates; Source: ISMA
The actual production, after sugar diversion towards ethanol, stood at 254.2 lakh tonnes (higher by 5.5%) as on
February 15, 2023 as compared to 240.9 lakh tonnes in the same period last year. Maharashtra and Uttar Pradesh
continue to be the major contributors with 94.1 lakh tonnes and 69.8 lakh tonnes, respectively. The number of
operating factories has also increased to 505 from 504 as on last year’s corresponding date.
2
Revenue for sugar mills expected to rise by 8-12% in FY23
For the current SS 2022-23, the government has decided to allocate an export quota of 60 lakh tonnes. The
additional sugar export quota will be decided after duly evaluating overall production and prevailing demand
scenario. This additional sugar export quota, if any, would help support sugar mills operating performance and
remain a key monitorable.
60
Towards Ethanol (Lakh
Sugar Diversion
45
34
tonnes)
22
9.3
3.4
Source: ISMA
The sugar diversion towards ethanol production is estimated to be at a consecutive record high of 45 lakh tonnes
in SS 2022-23 against 32 lakh tonnes in SS 2021-22 (y-o-y increase of 41%). By the SS 2024-25, the government
is targeting to divert 60 lakh tonnes of excess sugar towards ethanol, 88% higher than the diversion made in SS
2021-22.
As of February 15, 2023, the actual diversion towards ethanol increased by 38% to 25.8 lakh tonnes from 18.7
lakh tonnes of the last corresponding period.
The growing focus of the government along with sugar mills to divert excess sugarcane to ethanol will eventually
help to utilise the surplus production which led to high inventories of sugar. This bodes well for sugar mills to
improve liquidity and to help in making timely payments to the cane farmers.
Moreover, higher ethanol prices for producers have been encouraging distilleries to divert more sugar towards
ethanol. The distilleries are poised to see healthy business growth, due to higher ethanol prices derived from
different sugarcane based raw materials under the EBP programme for the SS 2022-23.
3
Revenue for sugar mills expected to rise by 8-12% in FY23
Chart 2: Ethanol Prices Derived From Different Sugarcane Based Raw material
65.61
62.5 63.45
Prices (Rs. per litre)
60.73
59.19 59.48 59.08
57.61
54.27
52.43
49.41
45.69 46.66
43.46 43.75
ESY 2018-19 ESY 2019-20 ESY 2020-21 ESY 2021-22 ESY 2022-23
Source: ISMA
In continuation to this, CCEA approved an increase in ethanol pricing for the ESY 2022-23 (December 1, 2022 to
October 31, 2023). The price of ethanol derived from the C heavy molasses route to be increased by ~6% to Rs.
49.41 per litre. The price of ethanol derived from B heavy molasses route and direct route (sugarcane juice/
sugar/sugar syrup) to be increased by ~3% to Rs. 60.73 per litre and Rs. 65.61 per litre, respectively. This price
hike was done to incentivise ethanol production as well as help government keep a check on sugar production.
Furthermore, looking at the overall profitability of the sugar mills, the distillery segment contributes a comparatively
higher profit margin than the sugar segment. Such remunerative prices to ethanol suppliers will help in early
payment to cane farmers, and improve the liquidity of Sugar mills.
4
Revenue for sugar mills expected to rise by 8-12% in FY23
Contact
Tanvi Shah Director tanvi.Shah@careedge.in +91 - 22 - 6837 4400
Soumi Dey Associate Director soumi.dey@careedge.in +91 - 22 - 6837 4400
Pankita Khatri Analyst pankita.khatri@careedge.in +91 - 22 - 6837 4400
Vanshika Goyal Analyst vanshika.goyal@careedge.in +91 - 22 - 6837 4400
Mradul Mishra Media Relations mradul.mishra@careedge.in +91 - 22 - 6754 3596
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