Sugar mills to delay crushing as inventory, debt mounts

Sugar mills across the country have delayed crushing amidst huge inventories, mounting debt and cane arrears and have sought government help to kick-start crushing operations in the new season.

High sugarcane prices and rising costs of production combined with rising unsold stocks have made it difficult for sugar mills to sustain production at current levels, presiden of the Indian Sugar Mills Association (ISMA) M Srinivasan said.

''The sugar industry has suffered substantial losses in the last season. At current prices, it is not sustainable to run the industry,'' Srinivasan said.

Sugar mills, he said, are facing tough time in raising working capital as bankers have put the industry in the negative list and have refused to extend loans without rationalisation of cane pricing.

The Rangarajan Committee appointed by the government to review cane pricing has recommended rationalisation of cane pricing in line with production costs and sugar prices.

Since banks are unwilling to lend, Srinivasan suggested that the government make arrangements for low-interest or interest-free loans to meet the working capital needs.

He said waiver of interest of up to 12 per cent on bank loans could give sugar mills additional liquidity of up to Rs 3,500 crore.

The ISMA president also suggested a hike in import duty on sugar to about 40 per cent in the absence of a ban on imports to stabilise prices.

India has imported an estimated 7.5 lakh tonnes of sugar so far this year, of which, about 3.5 lakh tonnes have been re-exported, according to Abinash Verma, director general of ISMA.

He also sought the government's help to export 3 to 5 million tonnes of sugar over the next eight to 10 months to reduce the inventory build up.

He said the current sugar stock of around eight million tonnes could rise to 10 million tonnes at the end of current sugar year, in September 2014.

However, he said at low current global prices, sugar exports are not viable unless the government provides transport subsidy.

He also suggested that the government allow conversion of existing sugar stocks into ethanol as an alternative.