NEW DELHI: 30th January, 2015: The sugar industry is passing through one of its worst financial crisis ever. The ex-mill sugar prices are at its lowest in the last 3 years and the mills across the country are struggling to pay FRP for sugarcane. This is probably the first time that the sugar mills are unable to even pay the FRP to most of the farmers. 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 or have been declared NPA accounts.
Cane price arrears in last sugar season in March-April 2014, had crossed Rs.13000 crore, which was an all time high. 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. The all India cane price arrears is already Rs.11000 crore at the end of January, 2015.
The sugar industry has produced surplus sugar continuously in the last 5 sugar seasons, including the current one. The sugar stocks at the beginning of the current season i.e. on 1st October, 2014, was 75 lakh tonnes, almost 25 lakh tonnes more than what can be said to be a reasonable opening balance at the beginning of October any year. During the current sugar season also, the industry will produce more than what is required domestically. The sugar mills are expected to produce around 260 lakh tonnes of sugar which, as compared to the domestic consumption requirement of around 247-248 lakh tonnes, would add around 10 lakh tonnes to the domestic surplus availability. Therefore, the opening balance in 2015-16 sugar season may go up from this year’s stocks of 75 lakh tonnes, unless some of the surplus could be exported.
Unfortunately, there is surplus sugar availability in the global market also. Almost all the sugar producing countries like Brazil, EU, Thailand, Australia, Russia, China etc. are expected to produce surplus sugar and therefore the global prices are also at one of its lowest in the last few years. Due to high sugarcane price fixed by the Governments, the cost of sugar production in India is amongst the highest in the world and Indian sugar is currently uncompetitive in the international market.
Surplus sugar production is a direct result of surplus sugarcane produced by our farmers. Due to the Government regulation that all the sugarcane, produced and offered to all the mills, have to be compulsorily crushed by them, the mills do not have any control on the quantity of sugar that they produce. Therefore, sugar industry should be assisted to tackle the surplus sugar.
The sugar industry desperately requires some help, including financial assistance from the Government, in the following form:-
The ex-mill sugar prices across the country, which are currently at the lowest in the last 3 years, have fallen by around Rs.300 per quintal in the last 4 months. The current prices are Rs.500 to Rs.700 per quintal below the cost of production. It is important to take corrective policy decisions and steps to ensure that not only the sugar prices stop from falling, but should recover the fall it suffered in last 4 months of Rs.300 per quintal, as well as slowly improve to allow mills to cover their costs. Only then will mills be able to pay cane price of farmers and repay bank loans on time.