Sugar Mills’ arrears to cane farmers may hit record this season
NEW DELHI: Sugar mills’ arrears to farmers for the cane purchased from them this crop year are set to exceed last season’s record high, as a fall in the sweetener’s price has affected their ability to pay, industry executives said.
The industry wants the government to continue offering incentives for exports to reduce local stocks, as supplies are estimated to exceed demand. India is the second largest sugar producer, behind Brazil, and largest consumer.
Mills have already run up arrears of Rs 11,000 crore and this is expected to go up as milling will continue until mid-April. Last season, the arrears were more than Rs 13,000 crore.
Uttar Pradesh, the No. 1 state in terms of cane output and the second largest sugar producer, has the highest amount outstanding at Rs 4,628.53 crore. The arrears total Rs 2,679.40 crore in Karnataka and Rs 1,649.80 crore in Maharashtra, the top producer of sugar.
In addition to this, sugar mills also have to clear Rs 2,900 crore arrears left from the 2013-14 season.
Mills say they are unable to pay the so-called fair and remunerative price to most farmers and need financial assistance from the government.
While sugar prices are market-driven, mills must pay government-set rates to farmers for sugarcane. They also need to pay farmers within 15 days of getting the supplies, but that isn’t happening. In UP, where mills are required to pay Rs 280 per quintal of sugarcane, the government has now asked mills to pay farmers Rs 240 within 15 days of procurement and the rest within three months of completing crushing.
“With the current season’s sugarcane prices either at the same level or higher, and the ex-mill sugar prices being substantially lower than what was in last year, it is feared that cane price arrears will be higher than last season if the situation is not rectified,” said Abinash Verma, director-general of the Indian Sugar Mills Association (ISMA), which represents both private and public-sectors sugar mills.
“Several sugar mills are unable to repay their bank loans and some of them have either become sick or applied for restructuring of loans under CDR (corporate debt restructuring) or have been declared NPA accounts,” said Verma.
Sugar production this year would touch 26 million tonnes with consumption requirement at 24.7-24.8 million tonnes, according to ISMA. The industry estimates the opening balance in the 2015-16 sugar season to go up from this year’s stock of 7.5 million tonnes. The season starts on October 1
“In a situation like this, we are asking the government to continue export incentive scheme on raw sugar and exports thereof for 2.5 million tonnes. Further, debt burden should be restructured, including moratorium of at least three to five years and reschedule of repayment as well as reduction in the interest burden of the mills,” said A Vellayan, president of ISMA. “Only this will help in ensuring that mills come out of the crisis.”
Ex-mill sugar prices in India are currently at the lowest in three years. They have fallen by around Rs 300 per quintal in the last four months and are Rs 500 to Rs 700 below the cost of production, claimed Verma.