March 24, 2015
Sugaronline | http://goo.gl/uUFIhg
Sugar mills are seeking the central government's intervention to reduce the gap between the production cost and sale price of the sweetener that is resulting in huge losses to the mills and rising cane price arrears to farmers, according to India's Telegraph newspaper.
Om Prakash Dhanuka, chairman of Riga Sugar and former president of the Indian Sugar Mills Association, said cane arrears were estimated to have grown to over INR170 billion (US$2.73 billion) in 2014/15 from INR85.77 billion in 2011/12.
"This is because of the losses suffered in the last 4-5 years on account of the mismatch in the cost of production and sale price of sugar," Dhanuka said.
Sugar prices have softened because of excess supply, caused by increased domestic production in states such as Maharashtra, Punjab, Haryana, Uttar Pradesh and Bihar and higher imports.
The ex-factory price of sugar in north India is around INR2,500 per quintal.
In Maharashtra, the leading producer, the price is INR2,200 per quintal. In contrast, the average cost of production is INR3,600 per quintal.
Unlike sugar prices that are market-determined, sugarcane rates are fixed by the state governments.
Cane prices have increased in the last five years, adding to the raw material cost.
Moreover, despite the surplus production, the country is still importing sugar.
In 2014/15, over 500,000 tonnes of sugar were imported.
"We need a parity between sugarcane and sugar prices. For 2015/16, the government can consider linking cane prices to sugar prices and the discretionary power of the state governments to fix cane prices should be abolished," he said.
With most of the mills running into losses, securing bank credit has become a challenge, too.
Dhanuka said the government needed to consider restructuring packages, which should include converting part of the working capital into term loans and expediting disbursement of interest-free loans to clear the arrears to farmers.
The government had raised the import duty on sugar to 25% from 10% last year, but Dhanuka said there was a need for additional duty and more incentives for exports.
The Centre has revised upwards the total sugar output for the current fiscal to 26.5 million tonnes from an earlier estimate of 25.0 million tonnes.