Image Credits: livechennai.com
Sugarcane farmers in the country are in for a tough time as their dues have risen to Rs 21,000 crore out of which Uttar Pradesh alone accounts for Rs 12,000 crore.
UP is expected to produce a bumper 11 million tonnes of sugarcane this season. The Indian Sugar Mills Association (ISMA), has also sought Government intervention to ease the situation.
With another bumper sugar production expected next season, there will be a surplus which will get added to the current surplus sugar in the country and fears are that farmers may not get their cane price payments quickly and arrears may only rise further the next season.
Bumper sugarcane crop this season has compounded the worries of sugar mill owners. The falling sugar prices have left sugar companies incurring massive losses.
According to an ISMA statement, “The current ex-factory sugar prices of around Rs 26-27 per kilo is Rs 8-9 below the cost of production. Applying the revenue sharing formula recommended by the Rangarajan Committee, the cane price paying capacity of mills works out to Rs 27 per quintal of sugarcane, whereas the FRP fixed by the Central Government at 10.8 per cent recovery works out Rs 290 per quintal of cane. This massive gap is really the reason for the cane price arrears of around Rs 21,000 crore now.”
ISMA director general Abhishek Verma told India Today, “Unless and until the sugar prices improve to at least cover the cost of production, it is going to be an extremely difficult task for sugar mills to clear the arrears even before the start of next season.”
“What is worse is that the working capital loans have been taken where the sugar prices are around Rs 33 per kilo whereas the current prices are so low that not only the revenue realized from sugar sales will go back to the bank as repayment of loans but they will still remain short of the margin the sugar companies will have to bridge from other sources,” he further added.
Sugar Mills have been demanding that the problem of surplus sugar is addressed to improve the situation. There is around 70 lakh tonnes of surplus sugar this year which is over and above the required opening stock.
“One could be by way of export for which the government needs to come forward and help fund the loss. The second would be that the government can create a buffer stock of at least 30 lakh tonnes to temporarily remove that quantity from the market, for which the carrying cost should be reimbursed by the government,” the ISMA statement said.
The situation of Uttar Pradesh is worse than other states because the UP government continues to fix a much higher price for sugarcane in the form of state advised price (SAP), which is the highest in the country.
Further, with better sugarcane varieties, sugarcane productivity is substantially higher. This is why UP sugar mills have produced highest ever sugar production which will be about 70 per cent more than just about 2 years back.
Sugar Mills are said to be facing challenges not only on cash flows and working capital but also on storage capacity for a huge quantity of sugar as well as molasses.
All India Kisan Sangharsh Samiti (AIKSS) leader VM Singh told India Today that when sugar mills make profits, they don’t share it with the cane growers. He questioned that iuf this is the case, then why should farmers suffer when sugar prices are at a low.
“The mill owners have been using the excuse of low sugar price for the past 20 years for their so called losses, yet the private mills in UP have gone up from 35 to 95 over 15 years,” he said.
“They pay high dividends to their share holders and have multiplied their reserves by 100 times only because sugar mills are making huge profits from the distillery, co-generation, fertilizer etc from the by-products of sugarcane like molasses, baggase and press mud,” Singh added.