Special Correspondent

Total loan liability of 15 functioning CSMs Rs.1,175 crore as on March 2009: report

Tamil Nadu is fourth largest sugar-producing State with annual production of 22 lakh tonnes

Chennai: Co-operative sugar mills (CSMs) in the State are tottering financially with an accumulated loss of Rs.1,475 crore as of March 2008 because of the high cost of production, loan servicing and belated or non-receipt of eligible subsidy, according to the Comptroller and Auditor General of India (CAG).

The CAG report for the year ending March 31, 2009, which was tabled in the Assembly on Friday, revealed that the total loan liability of the 15 functioning CSMs was Rs.1,175 crore as on March 2009 and 13 CSMs had negative worth since liabilities exceeded the assets.

Tamil Nadu is the fourth largest sugar-producing State with an annual production of 22 lakh tonnes. Sugarcane is cultivated on about 2.35 lakh ha every year and 15 CSMs, 20 private mills and two public sector mills are functional.

According to the CAG, the CSMs suffered heavy losses owing to high cost of production, which was always higher than sale realisation ranging from Rs.131 to Rs.508 per metric tonne during 2004-09.

The increase in production cost was mainly due to increase in sugarcane procurement prices as the government's State Advisory Price (SAP) was invariably higher than the Statutory Minimum Price (SMP) fixed by the Centre, the report stated, noting that material cost alone accounted for nearly 71 per cent of the production cost.

Besides, the purchase tax payable by the sugar mills was the highest in the country. The purchase tax and sugarcane cess were Rs.60 and Rs.5 per metric tonne compared to Rs.24 per metric tonne levied in Maharashtra, the CAG said, attributing the accumulation of loss to the government's policies.

Apart from the production cost, the CSMs failed to diversify into power generation, distillery operations, and so on, to augment their revenue. Lack of scientific approach, problems in linkage, crushing of overage sugarcane, frequent breakdown of machineries, non-maintenance of correct technical parameters in operations affected the efficiency of CSMs. Excess manpower, failure in marketing and excessive dependence on borrowed funds for working capital contributed to high production cost, which, in turn, led to recurring losses, said the CAG.