Sugar production cost in India is expected to increase on the back of government's decision to increase the Sugar price, which will also impact the margin of the Sugar mills.
The government has increased the fair and remunerative price (FRP) for Sugarcane to about 10.6 percent to Rs 255 per quintal for 2017-18 season from Rs 230 per quintal during 2016-17 season which is expected to remain unchanged.
With the increase in Sugar FRP, the production cost for Sugar is also expected to increase by about Rs 2500 to 2700 per ton. It is also believed that increase in FRP will encourage the farmers to increase the Sugarcane acreage.
Sugarcane output declined by over 12 percent to 306.03 million ton in the current season due to drought in key growing states, Maharashtra and Karnataka. With a normal monsoon forecast, the chances for 2017-18 have altered.