Sugar surplus may drop due to U.P. rains, higher ethanol capacity

Lower surplus, higher prices could help reduce arrears to farmers in poll bound U.P. and Punjab

Unseasonal rains in Uttar Pradesh and a higher diversion to ethanol production are likely to result in a drop in sugar production this year, according to industry estimates. With average retail sugar prices also on the rise, a reduction in surplus sugar could help speed up cane payments by mills and reduce their pending arrears to farmers this season.

Late payments and arrears have become a political flashpoint recently, especially in the poll-bound States of U.P. and Punjab. At the end of July, when the latest data is available, arrears to farmers stood at ₹2,417 crore.

Retail sugar prices are up 5% in comparison to last year. Delhi alone has seen retail prices spike over 13% in the last three months, according to monitoring by the Consumer Affairs Department.