The decline is on account of perceptible fall in cane availability in the case of co-operative sugar units. These mills which are expected to crush about 75 lakh tonnes of cane in the current season have managed to register cane only about 60 lakh tonnes for the next season.

The inordinate delay by the co-operatives in paying the cane price to the farmers coupled with the initial decision of the mills in the sector to pay a lower cane price compared to the previous season resulted in farmers opting to other cash crops.

The mills decided to pay only the statutory minimum price (SMP) of Rs 527 per tonne linked to 8.5 per cent recovery for the 1998-99 season as against earlier price of Rs 660 per tonne linked to 8.5 per cent recovery.

Though the stategovernment did later ask these mills to pay last year's price, the damage was done. Moreover, the financial position of the mills in this sector is such that only three of them would be in a position to pay last year's price that too in instalments extending up to September. Others have paid only the SMP and have sought help from the state government to the tune of Rs 140 crore to pay the balance. Even those that paid SMP did so in many instalments.

The private sector is better placed. As against 95 lakh tonnes that is expected to crush in the current season, they are expecting to get 100 lakh tonnes in the next. This is because the mills in this sector are more or less paying last year's cane price and are relatively prompt in making the payment.

Better vertical integration has come to the rescue of the private sector mills which helps them in improving their cash flow through value addition though sugar realisation per se continues to be in doldrums.

In the current season, sugar production in TamilNadu stands at 13.71 lakh tonnes as of March, 1999 and is expected to close the season at about 15 lakh tonnes.

The recovery rate which had initially declined have improved and is around 8.97 per cent compared to 8.52 per cent last year. Sugar production for 1999-2000 season is estimated at about 14 lakh tonnes.