BackSugarcane arrears may touch Rs17,000 crore, says Isma
Arrears have already crossed Rs15,000 crore, higher than the peak dues of Rs13,274 last year, says Isma
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New Delhi: Dues owed to sugarcane farmers by mills may touch a record 17,000 crore by the end of March amid falling prices, the Indian Sugar Mills Association (Isma) said on Friday.
Arrears have already crossed 15,000 crore, higher than the peak dues of 13,274 last year, and at current global prices, exports, even with an incentive of 4,000 per tonne, are not viable, the lobby group said.
In addition, sugar mills owe cane growers 2,600 crore in dues from last year.
“Sugar prices are falling due to an excess supply in the local market. The current sugar season of 2014-15 is the fifth year in a row of surplus sugar production," Isma said in a statement.
“Several sugar mills have not received any working capital (from banks) in the current season... The Allahabad high court judgement of 5 September 2014, giving priority to outstanding cane price payments of farmers over the bank loan repayments, has scared the banks away from sugar, as they fear that there is no guarantee to get loan repayments from sugar mills," it added.
Sugar production is expected to touch 26.5 million tonnes (mt), higher than the earlier estimate of 25 mt, according to food ministry estimates. Domestic consumption is estimated at 24.8 mt and total surplus stock at the end of the season is estimated at over 3 mt.
In the past six months, ex-mill sugar prices have fallen by nearly 7,000 per tonne and current prices are the lowest in three years and are falling by 25 per quintal daily, according to Isma.
This is the first time that mills are unable to pay even the fair and remunerative price (FRP) of 220 per quintal, fixed by the central government as the minimum price mills have to pay to cane farmers, the industry body said.
The commission for agricultural costs and prices, which recommends the FRP, estimated ex-mill sugar prices between 3,000 and ₹ 3,400 per quintal. At present, the price is much lower, between 2,300 and 2,500 per quintal.
“With global prices continuing to fall, the export of raw sugar will no longer be viable at the export subsidy of 4,000 per tonne," said Abinash Verma, director general of Isma. “To make exports viable, it would require an additional incentive of about 1,500 per tonne."
“While mills have to pay a mandated price for cane and purchase whatever quantity is offered by farmers, price of sugar is determined by the market. The long-term solution to the problem is by linking cane prices to sugar prices," he added.
The cabinet had approved the export incentive on raw sugar last month allowing sugar mills to export upto 1.4 mt of raw sugar. However, till date, only 15,000 to 18,000 tonnes is estimated to have been exported or contracted for exports.
The FAO (Food and Agricultural Organization) Sugar Price Index averaged 207.1 points in February, down 4.9% from January, the sharpest move of any commodity, the UN body said earlier this month, adding, “the drop reflected optimism on production prospects in Brazil after recent rainfalls, as well as India’s announcement it will subsidize exports to boost sugar sales abroad".
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