India is the world's No. 2 producer of sugar

Sugar production in India could fall as much as 15 per cent in 2019-20 from the year before as severe drought hits a key growing region, industry sources told Reuters.

The drop would ease pressure on the sugar mills to export surplus sugar, likely supporting global prices that fell more than 20 per cent last year, partly due to subsidised shipments from the country.

The world's No. 2 producer of the sweetener could churn out 28 to 29 million tonnes in the 2019-20 crop year starting from October, down from 33 million tonnes this year, said Prakash Naiknavare, managing director of the National Federation of Cooperative Sugar Factories (NFCSF).

"The cane area has fallen drastically in Maharashtra due to drought. The water scarcity could also hit cane yields," he said.

Millions of people have been desperately awaiting overdue monsoon rains as they struggle to secure drinking water amid a heat wave that has been rapidly drying up reservoirs and sending temperatures soaring across the country.

In Maharashtra, the amount of land planted with cane that would be harvested in 2019-20 crop year has fallen 28 per cent from the year before, estimates the state's sugar commissioner, Shekhar Gaikwad.

Maharashtra, the country's second-biggest sugar producer, could produce 6.5 million tonnes next season, down 39.2 per cent from the current crop year, Mr Gaikwad said.

"The drop could be even bigger if the state gets lower rainfall this year," he said.

The monsoon usually covers the cane growing areas of Maharashtra by June 10, but it is yet to arrive this year, weather department data shows.

And as water scarcity has created a shortage of cattle fodder in some areas, farmers like Ramdas Pawar from Maharashtra have been selling sugar cane for fodder.

"Cane was wilting. I harvested two acres and sold cane as fodder to a cattle camp," he said.

Years of bumper cane harvests and record sugar production have hammered domestic sugar prices, making it hard for mills to pay money owed to farmers, who form an influential voting bloc.

To bring down cane arrears and reduce rising inventories, New Delhi has been providing incentives to mills for overseas sugar sales and set an export target of 5 million tonnes for 2018-19.

Despite lower production, India will still have to export sugar in the next season due to ample stock from two years of ample harvest, Mr Naiknavare said.

Sugar inventories are likely to rise to 14.7 million tonnes at the beginning of the new season on October 1, up 37.4 per cent from a year ago, the Indian Sugar Mills Association (ISMA) said last month.

"Inventory levels won't come down without exports. The government could provide export incentives even next year," said a Mumbai-based dealer with global trading firm. He declined to be identified as he was not authorised to speak with media.