Mills owe Rs 11,000 crore of sugarcane dues to farmers

By: | Published: January 31, 2015 12:13 AM

Figure poised to exceed R13,000 cr by April, says Indian Sugar Mills Association

As sugar prices have dropped below cane costs to hover around three-year lows, dues to farmers for purchases of the raw material have already hit Rs 11,000 crore and are poised to exceed Rs 13,000 crore by April, the Indian Sugar Mills Association (ISMA) said on Friday.

Hit hard by high cane prices fixed by state governments and low sugar prices for successive years, the debt levels of sugar companies jumped to Rs 36,601 crore at the end of 2012-13, compared with Rs 11,443 crore in 2007-08, ISMA said.

Since banks are now reluctant to offer advances to the sugar industry, cane arrears are only expected to go up this year, it has warned.

Sugar

In such a situation, the government should announce the continuance of a subsidy scheme for raw sugar exports at the earliest to reduce huge inventory, and also offer dole-out for at least 2.5 million tonnes for the marketing year through September, ISMA president A Vellayan said.

The subsidy amount should be fixed at Rs 4,500 per tonne, given that sugar prices dropped below 15 cents per pound on Friday for exports to be viable. In contrast, the food ministry has recently proposed a subsidy amount of Rs 4,000 per tonne for raw sugar exports up to 1.4 million tonnes by end-September.

Moreover, the states fixing high cane prices, over and above the benchmark price set by the Centre, be asked to bear the differential between the two, ISMA said.

Thanks to the elevated cane price, the cost of sugar production in UP stood at Rs 3,400 per quintal, compared with the ex-factory sugar prices of Rs 2,700 per quintal. Mills in the state have already incurred losses to the tune of Rs 7,250 crore in the three years through 2013-14.

Of the Rs 11,000 crore of cane arrears, UP accounts for roughly Rs 4,600 crore.

The state government has set the cane price at Rs 280 per quintal for the season that started on October 1 — far more than the fair and remunerative price of Rs 220 fixed by the Centre.

While the state has announced some incentives — Rs 11.40 per quintal initially — for cane purchases, it has said it will decide on more packages only after the crushing season is over. Sugar mills have consistently blamed the “arbitrary” fixing of exorbitantly high cane price in UP for their distress.

Moreover, despite the Centre’s push for mandatory blending of ethanol with petrol, state-level levies on the bio-fuel have made the matter worse for sugar mills which produce ethanol.

While Uttar Pradesh imposes a levy of Re 1 per litre for ethanol supplies outside the state, Maharashtra charges Rs 1.50 per litre. Also, as many as nine states, including Gujarat, Maharashtra and Delhi, impose levies of up to Rs 3 per litre on ethanol that comes from other states.

Sugar output may rise 7% in 2014-15

Sugar output in India, the world’s second-largest producer and biggest consumer, will likely rise up to 7% year-on-year in the next marketing year starting October, ISMA said.

Production is expected to hit 26 million tonnes in 2014-15, up from the last estimate of 25-25.50 million tonnes and compared with the expected consumption of around 24.80 million tonnes, according to ISMA.

The country last year produced 24.30 million tonnes of sugar and 25.14 milllion tonnes a year before. The food ministry has projected sugar production of around 25 million tonnes for 2014-15.

Prescription

* ISMA wants the govt to announce continuance of a subsidy scheme for raw sugar exports to cut huge inventory, and offer dole-out for at least 2.5 mt for the marketing year
* Subsidy amount should be fixed at R4,500 a tonne, given that sugar prices dropped below 15 cents per pound on Friday for exports to be viable
* States fixing high cane prices, over and above the benchmark price set by the Centre, be asked to bear the differential between the two

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