According to a report by CareEdge Ratings, Indian sugar businesses would likely witness an increase in revenues of 8–12% in FY23, driven by increased installed capacity as well as higher ethanol blending targets and prices.
According to the Indian Sugar Mills Association, domestic sugar production will reach a peak of 358 lakh metric tonnes in 2021–22 and will decline to an estimated 340 lakh metric tonnes in the sugar season 2022–23, which runs from October to September. The highest amount of sugar ever diverted to ethanol is anticipated to be 45 lakh metric tonnes, up 41% year over year (Isma).
“This growing focus on ethanol with high realization is projected to drive an 8–12% revenue increase for sugar mills this fiscal year.” The government hopes to redirect 60 lakh metric tonnes of extra sugar per year to ethanol by 2025, according to the research.
Based on studies of the leading players who make up roughly 50% of the organized sugar sector, it is predicted that sugar mill income will rise by 8–12% in FY23. The rise in installed capacity for distilleries and sugar production, as well as the price and target for ethanol blending, are anticipated to promote growth, “Tanvi Shah,” director of CareEdge Consulting & Research, said.
“With the government’s ongoing support for the sugar industry and increased emphasis on diverting resources into ethanol production to boost India’s Ethanol Blending Program, the sugar industry is likely to gain traction moving forward,” she added.
Sugar production grew at a rate of about 5% per year as of February 15, 2023.(YoY).
The sugar export quota for this season has reportedly been fixed at 60 lakh metric tonnes, which is less than the 72 lakh metric tonnes and 112 lakh metric tonnes shipped in SS 2020–21 and SS 2021–22, respectively. After considering the demand-supply scenario, additional sugar export quotas will be decided.
The performance of the sugar mills could be helped in the short term by a GST decrease from 18% to 5% and any new export quotas announced by the government.
It said, “The cost of ethanol produced via the C-heavy molasses route is to be raised by 6% to Rs. 49.41 per liter.”
By raising the price of ethanol produced via the B heavy molasses route and direct route (sugarcane juice, sugar, and sugar syrup) by 3% to Rs. 60.73 per litre and Rs. 65.61 per litre, respectively, sugar mills will be encouraged to produce ethanol with a high profit margin and support its profitability.