The government has issued show cause notice to 252 sugar mills across the country for failing to submit monthly returns regarding dismantling of sugar buffer stocks.
The government has also threatened to take action against them under the Essential Commodities Act, 1955 if they fail to file monthly return on dismantled buffer stock of 20 lakh tonnes for the months of May, June and July by August 25th.
The largest number of erring sugar mills are in Uttar Pradesh followed by Maharashtra.
It may be mentioned that the Union government by a order in July dismantled the sugar buffer stock of 20 lakh tonnes that it had asked mills to create last year and allowed them to sell the dismantled buffer stock in the domestic market at any point of time during 2007-08 sugar season that ends October.
The stocks were allowed to be sold without the requirement of release orders from the Directorate of Sugar.
Later, the government also allowed dismantling of the second lot of the sugar buffer stocks of 30 lakh tonnes and allowed mills to sell 25% of the stock in August and September, while the remaining 75% at any point of time during the 2008-09 sugar season.
Sugar mills were required to submit monthly returns by 31 July for the 20-lakh tonnes of buffer stocks sold in the open market and subsequent returns were to be filed by the 10th of each month for the remaining stocks sold.
Though the government tried to increase sugar availability by dismantling the buffer stocks and keep prices under check, but many mills across the country not only failed to dismantle the stocks, but also resisted from filing their returns.
This gave rise to the suspicion that mills were not following the government order and were hoarding sugar stocks in anticipation of future rise in prices.
The recent order seeks to tighten the screws against erring mills and bring out hoarded stocks into the market.
Last year, the government had decided to create the two buffer stocks for one year to absorb excess sugar from the market and prevent prices from crashing sharply down as production rose to an all-time high of over 26 million tonnes, while domestic consumption was around 20 million tonnes.
This year however, sugar prices have been rising since the last few months and have jumped by over Rs 300 per quintal to Rs 400 quintal necessitating the need to dismantle the stocks to increase supplies.
As per government’s initial estimate sugar production in the country in the coming crop season 2008-09 is expected to fall to around 22 million tonnes to 23 million tonnes, down from 26.5 million tonnes due to low acreage and drop in per hectare yield.
Till last week, according to government’s estimate, the area under sugarcane has shrunk to 44.1 lakh hectares, down from 53 lakh hectares last year.
