Sugar industry seeks export sops as dues to cane farmers top Rs15,000 crore

The indian sugar industry is looking to the government for help to bring down the rising dues to cane farmers amidst mounting stocks with sugar mills and falling sugar prices.

According to industry association Indian Sugar Mills Association (ISMA), the arrears that mills owe farmers have already touched a record above Rs15,000 crore. The association is now lobbying with the government for a hike in sugar prices to clear at least part of the dues.

Record production of sugar in major sugar producing countries like Brazil, Thailand and India in the marketing year 2012-13 and 2013-14 coupled with a fall in the prices of agricultural commodities and the depressed prices of crude oil in the international market have combined to depress sugar prices in India.

Commerce minister Nirmala Sitharaman on Friday agreed with ISMA that exports had become uneconomical.

Also, weak crude oil prices make diversion of cane towards ethanol, also equally unviable, Sitaraman told the Lok Sabha on Friday.

A Vellayan, ISMA president, had asked the government to provide incentives for export of 1.5-2.0 million tonnes of white sugar.

The government has been providing some incentives for export of raw sugar. But, as things stand, there is little export of raw sugar as this is unviable because of low global prices of sugar.

ISMA office bearers said that since India continues to be a sugar surplus country, the government policy has to be export-oriented.

"The sugar industry is facing a huge financial crisis. Sugar prices are falling continuously every month. Due to low realisation from sugar, the mills are unable to recover the cost of production and generate enough cash flows," ISMA said.

Depressed global prices have pushed down retail prices of sugar in the domestic market to Rs20-22 in Maharashtra and Rs25 in Uttar Pradesh. With another bumper year forecast, the problem will be compounded further, says ISMA.

According to ISMA, mills have to dispose of at least 3 million tonnes of the surplus stocks to improve their liquidity. The association also sought the creation of a 2- million tonne buffer stock for public distribution system next year so that the amount would be drawn out of the market, which in turn would help raise market prices of sugar.

Alternatively, the ISMA also suggested that the government encourage production and supply of fuel grade ethanol by giving an incentive of Rs 7-8 / litre.

 ISMA says there is a demand-supply gap of around 1,000 million litres of ethanol in the country.