Mills and co-operatives across the country owed nearly R18,112 crore to farmers by mid-June for cane purchases, lower than the record arrears of R21,836 crore until April 15 but still higher than the dues at this point of time for any other year, according to the official data.
The share of Uttar Pradesh — the traditional trouble spot of the cane crisis — in the total dues has come down to just over 50% this year, compared with that of 60-70% at any time during the crushing season in recent years. This is because other key producers — including Maharashtra and Karnataka — are also facing a crisis in payment due to a slide in sugar rates to below even the cane costs.
Sugar prices are hovering around seven-year lows in key states, thanks to five straight years of surplus production and an absence of adequate export opportunity following a plunge in global commodity prices. Consequently, Maharashtra also accounted for 18% of the country’s cane arrears and Karnataka 12%.
The industry, for the first time in at least two decades, is struggling to pay even the benchmark cane price fixed by the Centre, which is lower than the rates fixed by states like Uttar Pradesh for payment to farmers within their respective territory.
The Centre last month decided to extend a loan package, worth R6,000 crore, to the cash-starved sugar mills to help clear cane arrears and offered to bear a 10% interest subsidy on the loan for one year. However, the package failed to enthuse the industry, which termed the move an “inadequate” response to a crisis, as it didn’t solve the basic problem of excessive stocks and a lack of a linkage between the price of cane and its by-products, including sugar. With banks refusing to give working capital loans to many mills, bulk of these arrears are all set to be paid in the next sugar season only.
The industry has now demanded that the government set up a price stabilisation fund for cane and pay the difference between the fair and remunerative price (FRP) and the price of cane in accordance with the Rangarajan panel’s linkage formula. The panel had suggested that mills pay 70% of the prices of cane and other by-products or 75% of the prices of only sugar to farmers for cane purchases. Based on this formula, the cane price should be roughly R55 lower than even the FRP of R230 per quintal for the 2015-16 season, the industry has said.
Sugar output at eight-year high
The country’s sugar output rose more than 16% until end-June in the marketing year through September from a year before to stay at an eight-year high, further worsening a glut in the market. Industry executives expect another 3,00,000 tonne of sugar to be produced in the rest of the current marketing year.
The country produced 28 million tonne up to June 30, compared with 24.07 million tonne a year earlier, according to the latest data compiled by the Indian Sugar Mills Association (Isma).