PUNE, Nov 29: The Credit Rating Information Services of India Limited (Crisil) has predicted that any substantial increase in the quantum of cheap imported sugar during the current season is likely to cause a glut in the domestic market thereby having an impact on the end realisations, profitability, inventory levels and liquidity levels and liquidity profiles of the players in the industry.In the emerging scenario, only established players with high operating efficiencies, strong cane procurement mechanism, good capital structure and comfortable liquidity position would be able to tide over the difficult cycles that the industry is exposed to. However, any government intervention in the form of stronger import barriers could have a favourable impact on prices and performance of the industry, it was pointed out.Crisil expects the depressed realisations to improve significantly during the current year and this is expected to result in increased pressure on the relatively smaller units operating with suboptimal capacities.During the 1997-98 sugar season, while the demand was around 148 lakh tonnes, sugar production stagnated at the 1996-97 levels of around 129 lakh tonnes.Any upward movement of prices to a significant extent was however restricted on account of the shortfall of being met out of stocks of 65 lakh tonnes and imports of around 9 lakh tonnes. The industry has been facing an increased incidence of imports due to declining international prices. In addition, the protection to the industry arising out of the duty levied in April 1998 has been largely provided by the exporting countries.In the 1998-99 sugar season, in line with the typical sugar cycle, Crisil expects the production to go up by around 20 per cent. The world sugar production is also expected to be at the previous year levels of around 129 tonnes. Crisil believed that a significant increase in sugar prices in the domestic market is unlikely and the prices are expected to remain subdued.
